Why Does a Hip Surgery Cost $78K in the U.S. and $13K in Belgium?

New York Times series looks at skyrocketing prices in American hospitals, including ones in the Bay Area, and the imbalance between the benefits of being tax-exempt versus charity cases.

Bay Area hospitals, including Queen of the Valley in Napa, are among hospitals statewide under fire for benefiting from tax breaks while not spending much money on charity cases.
Bay Area hospitals, including Queen of the Valley in Napa, are among hospitals statewide under fire for benefiting from tax breaks while not spending much money on charity cases.
Over the past few months, the New York Times has been running a series of articles investigating the rising cost of healthcare in U.S. hospitals. For the most part, the pieces have focused on comparing the high prices patients pay in the United States to the often lower hospital bills found in other developed countries where the quality of treatment is equal to, if not better than the care offered in American hospitals. 

The differences are often huge. One man profiled in the third part of the series went to Brussels for an artificial hip after learning his local hospital was going to charge him $78,000 for the operation. The bill in Belgium was $13,600, including round-trip airfare between Colorado and Europe. 

Tuesday’s installment is the fifth in series and it looks at hospitals in Northern California to illustrate the frequently exorbitant prices charged for basic items like IV bags and codeine pills. 

Using as examples hospitals familiar to every resident of the Bay Area, the article also shows that public records don’t support the claims of hospital administrators that huge bills combined with tax exemptions help hospitals pay for charity care provided to poor people. 

The New York Times article relied heavily on research from the Institute for Health and Socio-Economic Policy, which released a report in August documenting how the non-profit status enjoyed by hospitals cost the state and counties $1.8 billion in 2010. 

According to that research, wealthier hospitals provide very little amounts of charity care. For example, In 2010, California Pacific Medical Center’s three oldest campuses in San Francisco saw charity care patients at a patients per bed rate less than half that of Saint Francis, despite being more than three times the size of Saint Francis and having significantly greater financial stability. 

In another example, Queen of the Valley Hospital in Napa in 2010 spent 3.56 of its operating expenses on charity care. Petaluma Valley Hospital spent 5.52 percent and Novato Community Hospital spent 5.18 percent.

The lowest spent was zero and the highest was more than 30 percent.

That report scathingly said: "San Francisco Bay Area hospitals collected 56 percent more revenue per patient day than hospitals in Southern California, due to a lack of competition, by companies like Sutter, controversial for the battle it had with the Marin Healthcare District between 1995 and 2010, and Catholic Healthcare West.

Non-profit hospitals are forbidden from using surplus revenue to benefit individuals. Instead, the surplus money is to be used to benefit the communities the hospitals serve. In return, these hospitals don’t pay state or federal taxes on profits, they don’t pay property taxes and they are not obliged to pay sales taxes. Charity care is not a requirement of maintaining tax exempt status. Kaiser and Sutter would both be in the Fortune 500 if they were for-profit enterprises, according to the Institute for Health and Socio-Economic Policy . 

The Orinda-based policy group estimated that the tax exempt status of non-profit hospitals cost Marin County $11 million, Sonoma County $23 million and Napa County almost $14 million.

The New York Times series comes at a time when the healthcare industry is in the midst of massive change. The Affordable Care Act aims to drive down healthcare costs even as a wave of consolidations among providers has afforded organizations like Sutter Health more muscle to set prices. Fortunately for consumers, these changes are accompanied by new tools that allow patients to compare prices between hospitals. 


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