Why Do Hospital Costs Vary So Much?

Imagine paying hundreds of dollars more for a health care service at one hospital than you would just a few miles away at another hospital.

The Wall Street Journal says that is the reality in Boston. The newspaper looked at newly available hospital data and discovered that in one situation, a hospital would charge $400 more for an emergency room visit than another hospital 3 miles away.

The ability to spot such price differences is the result of a recent federal rule that went into effect this year requiring U.S. hospitals to divulge all their prices.

The WSJ says its analysis also found that in many cases, a hospital will charge patients different rates for the same services, depending on the patients’ insurance.

So, why do costs vary so much? According to the WSJ, quality differences account for some of the gaps. But there are other factors:

“Hospitals and insurance companies set prices through bargaining, where they make trade-offs that save money for some patients but not others. Some hospitals or insurers can have more skill or leverage to negotiate prices, and they typically cut broad deals that may secure a low rate on certain services in exchange for concessions on others.”

The WSJ says prestigious hospitals — such as Massachusetts General — often can charge higher rates, while large insurers in the same market, such as Blue Cross Blue Shield of Massachusetts, often have the ability to get steeper discounts.

The moral of the story — as always — is to shop around to get the lowest costs. For more tips on trimming your health care tab, check out “7 Ways Anyone Can Cut Their Health Care Costs.”