Based on a review of data in the Medicare Provider Analysis and Review (MedPAR) file, it is apparent that the average charge per Medicare admission is far higher in 10 states (> $20,000 per admission) than the corresponding national average charge. In the most extreme examples (California and Nevada) the average charges are more than $40,000 higher than the national average of $55,000 for each Medicare admission. This number becomes even more extreme when the 10 states are taken out of the equation where the remaining average charge per admission is under $45,000.
Disparities in Medicare Charge in High-Dollar States Versus National Average
The first level of analysis shows the higher charges are not a direct result of any significant differences in the application of care: The same group of conditions (shortness of breath, chest pain, and altered mental state) were shown as primary reasons for admission. Furthermore, the resulting treatments bundled into DRGs (heart failure or blood or other bacterial infections) are similar as well. Although the average length of stay was slightly higher in the high-dollar states, the difference is small and would not explain the high level of difference in charges.
A more detailed analysis by hospital department identifies five areas where the charges per admission were significantly higher in the high-dollar states than in the other states: The intensive care unit (ICU), pharmacy, medical supplies, operating room, and laboratory. The average charge per admission is at least $2,400 higher in the 10 high-dollar states, and in the case of ICU and laboratory, the average is nearly double the charges from the remaining states.
These differences indicate that although hospitals across the United States are seeing patients with similar conditions and treating them in much the same way, the charges associated with the departments within the hospitals vary widely and can be identified as a primary reason for the outlier status of the charges from the high-dollar states.
Disparities in Key Hospital Charges Between High-Dollar States and the National Average
As a result of the higher charges, these same states also show higher estimated costs per admission with rates 9.5 percent higher than the national average and 15 percent higher than the remaining states.
The MedPAR file, compiled by the Centers for Medicare & Medicaid Services (CMS), represents every inpatient hospital admission processed for Medicare beneficiaries in the nation and contains a number of data elements that can provide hospitals with in depth and meaningful indicators relating to utilization, lengths of stay, diagnosis and procedure use, and assignment as well as financial performance indicators. A key feature of this file is the ability to identify the state in which each facility is located by the use of the assigned Medicare Provider Number. By using each hospital’s assigned Medicare Provider Number it is possible to perform geographic breakouts to compare one state’s utilization and performance of providers in one state with those of providers in other states. This analysis is based on the recently released CMS year 2016 MedPAR file. CMS Hospital Cost Reports were used to calculate estimated ratios of costs to charges.
This analysis was provided by Optum Advisory Services Consulting. For more information please contact Jan Welsh.