How much does a hip, knee or spinal fusion cost your hospital?

What is the sticker price for a knee replacement in the Philadelphia area? It depends where you go.

The average fee for the procedure at Thomas Jefferson University Hospital is $72,340. Across town, Penn Presbyterian Medical Center charges an average of $90,098.

Temple University The hospital charges more on average for a knee replacement than any other hospital in the region: $152,521, more than twice the statewide average, according to the analysis of common hospital procedures by the Pennsylvania Health Cost Containment Council, which maintains a database of billing information submitted by hospitals.

Hospital fees are notoriously arbitrary and exorbitant. They represent the prices billed for care — not the amount actually paid by patients or insurers. Private insurers and government funded Medicare and Medicaid health care programs negotiate up front to pay rates that are significantly lower.

Temple, for example, says less than 1/10 of 1 percent of its patients pay the charge fee. Patients are not harmed by inflated prices, hospitals claim.

“We’re not lining our pockets with gold,” said Gerald P. Oetzel, Temple Health’s chief financial officer. “It doesn’t make sense.”

But charge rates or list prices are often among the few financial details patients can uncover when trying to compare how much a procedure might cost at different hospitals.

And while most patients will never be on the hook for a list-price service, people who are uninsured or have insurance from a small firm that can’t negotiate a big discount could end up paying, he said. Ge Bai, teacher. in accounting and health policy at Johns Hopkins University. Excessive fees can play a role in driving up health care costs for people with insurance, giving hospitals more bargaining power to negotiate higher payments, she said.

Finding out how much a knee or hip replacement actually costs can be a challenge. Hospitals were needed from 2021 post your negotiated insurance rates and rates online for thousands of procedures, but spreadsheets can be difficult to understand, let alone compared across multiple hospitals.

Independent pricing websites refer to the price of total knee protection from $15,000 to over $100,000. Private insurance, Medicare, and Medicaid usually cover the procedure, and insurers can provide more accurate estimates based on a patient’s specific health plan.

PHC4’s Annual Common Procedures Report provides a behind-the-scenes peek at three procedures: knee replacement, hip replacement, and spine fusion, based on data from October 2022 to September 2023. The report focuses on these procedures because they are common and more less complex than, say, heart surgery. This makes it easier for PHC4 to correct for differences and compare across multiple hospitals.

Analyzing hospital charges

Hospital charges generally do not predict how much a patient will pay for their care.

“We could charge $1 million and they’ll pay us $12,000, or whatever the rate is,” said Michael A Young, Temple Health’s president and CEO.

So why charge such high, unrealistic rates?

Medicare and Medicaid take rates into account when deciding how much to pay for care in some cases. Medicare will make an additional payment when the cost of a patient’s care exceeds the normal Medicare rate. These additional payments, called aberrant paymentsare calculated as a percentage of the loading rate.

“It’s very, very tiny, but there’s money there,” Young said.

Temple has the highest average fee for all three procedures – hip replacement, knee replacement and spinal fusion.

Temple charges an average of $177,600 for a hip replacement, $58,000 more than the most expensive hospital in the Philadelphia area, Hospital University of Pennsylvania (which charged an average of $119,155 across five cases reviewed by PHC4). Temple’s price is more than twice the statewide average of $75,883.

High list prices can give health systems an advantage when negotiating rates with insurers, said Bai, the Hopkins professor. Toll rates serve as the health systems’ opening negotiation offer—the set prices are usually a percentage discount from the list price.

“Having a senior tax officer is paying off,” Bai said. “The potential financial benefit is there.”

Smaller insurance plans may not have much bargaining power against a large health system to negotiate a significant discount on high list prices, she said.

People with high-deductible health plans pay thousands of dollars out of pocket before their plan becomes eligible for higher rates — and they can get stung by high list prices.

Rates vary within health systems

A lot of factors can influence the price: the complexity of the cases, how long patients stay in the hospital, their health and what additional care they needed during their stay.

PHC4 takes these factors into account by calculating what it calls a “case mix-adjusted fee average,” which is the average amount a hospital charges patients for the entire stay during which they had the procedure.

Fees still vary widely – even within health systems, according to the PHC4 report.

The Hospital of the University of Pennsylvania had the highest average fee for knee and hip replacements in the Penn Medicine system. That’s because the hospital handles a small number of the most complicated cases — the vast majority of the system’s knee and hip replacements are performed at Penn Presbyterian Medical Center and Pennsylvania Hospital, said Holly Auer, a spokeswoman for the health system.

Thomas Jefferson University Hospital charges an average of $80,263 for a hip replacement, nearly twice as much as Jefferson Abington. The average suburban hospital charge of $44,114 is among the lowest in the Philadelphia area.

Jefferson Einstein Hospital Philadelphia charges an average of $184,164 for a spinal fusion, compared to $58,165 at Jefferson Lansdale.

Jefferson did not respond to a request for comment in time for publication.