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Hospital Contracts for MRI and Emergency Services in Northern California–Bigger Hospital Chains Getting Bigger Reimburseme

Posted Aug 23 2010 12:18pm

This sounds just like what we hear in the news from the east coast in Boston so this goes to show this is not an isolated issue.  The hospital chain mentioned here is Sutter which has quite a few hospitals in northern California, thus they are able to command higher reimbursement is appears.  Granted when you look at imaging facilities and the types of equipment and diagnostic services that does make a difference but are these available at each facility?  image

When you look at the cost of an MRI quoted below it’s big, but the hospitals also have more overhead than an outpatient facility too, so where do you make the decision here?  The insurance companies didn’t want to talk about it either and wanted to remain anonymous, so much for transparency here. 

It also makes one wonder what some of the big for profit chains get by comparison too as they all compete.  It would be nice at some point to have everyone on the same page here so cost analysis comparisons could perhaps shed some light on where some additional savings could be realized.  BD

After Mark Logsdon tore a ligament in his knee skiing at Lake Tahoe in March, he returned home to suburban Sacramento and had an MRI scan at Sutter Davis Hospital.

Sutter's price for the knee scan was $1,271, payable by Logsdon and his insurer. Exactly the same MRI at one of the local imaging centers owned by Radiological Associates of Sacramento would have cost $696 -- 45 percent less.

It turns out that Logsdon didn't know something that his insurance company does: Sutter Health, the nonprofit that owns Sutter Davis, has market power that commands prices 40 to 70 percent higher than its rivals per typical procedure -- and pacts with insurers that keep those prices secret.

Sutter can also charge these prices because it has acquired more than a third of the market in the Bay Area-to-Sacramento region through more the past 30 years, according to executives of Aetna, Health Net and Blue Shield of California, who asked not to be named because their agreements with Sutter ban disclosure of prices.

And his case is not unique. In Silicon Valley, when obstetrician Sarah Azad, a solo practitioner, delivers a baby for a patient covered by Aetna, the insurer pays her $2,052. When Nicole Wilcox of Sutter's Palo Alto Medical Foundation does the same job, Aetna pays Sutter $5,890.

As Sutter's confidentiality terms show, the actual prices that hospitals receive are often kept secret by insurers. Patients in need of hospital care, especially in emergencies, often can't travel very far, restricting competition. And if they have health insurance, they have little incentive to price-shop.

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