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Hospital and Surgery Costs

Total health care spending in America was approximately $2.7 trillion in 2011. A little over 31 percent of that amount, or $814 billion, was spent on hospital services. Hospital costs averaged $3,949 per day, and costs per stay averaged $15,734.

According to the U.S. Centers for Disease Control and Prevention (CDC), the total number of inpatient surgeries performed in 2009 was 48 million. Total spending for common hospital operating room procedures in nonfederal community hospitals was over $166 billion. The top three surgical procedures in terms of overall cost were: spinal fusion surgery ($11.26 billion), balloon angioplasty of the heart ($11 billion), and knee replacement surgery ($10.36 billion).

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Hospital Costs

There is no standard system that determines what a hospital charges for a particular service or procedure. Many factors figure into hospital pricing, including an individual’s health circumstances, the cost of lab tests, X-rays, surgical procedures, etc., operating room and post-surgical costs, medications, and doctors’ and specialists’ fees.

For example, if one patient’s recovery from an operation takes place in an Intensive Care Unit (ICU) and another’s in a recovery room, costs can vary by many thousands of dollars even if the two patients’ surgeries were similar. The cost of gallbladder surgery is different for someone with diabetes than it is for someone who doesn’t have diabetes.

In addition, overall hospital costs vary considerably depending upon where a hospital is situated and who winds up paying the bill – the patient, an insurance company or a government program like Medicare or Medicaid.

The bottom line is that no two hospital bills are likely to be the same. So regardless of a hospital’s published fee schedules for a service or procedure, the best information that a prospective patient can receive is a good-faith estimate. Until the bill is actually processed, there is no reliable way to assess a patient’s final hospital costs.

Surgery Costs

Just like hospital costs, it’s equally difficult trying to quantify the costs of a particular surgery, as total payments are often broken down into hospital expenses (60-80 percent depending upon procedure), physician payments (13-19 percent), and post-acute care (7-27 percent).

In addition, surgery costs vary depending upon who pays for the operation. An individual who is self-paying will be charged a different amount than a private insurance company which, in turn, will be charged a different amount than Medicare or Medicaid, since all insurance providers negotiate fees in advance, with the bigger payers getting the best rates.

For example, in 2005, the average total payment for back surgery in the United States was $26,515. But the difference between the lowest and highest payments for the procedure was $18,762. Coronary artery bypass surgery averaged $45,438, but the differential between the highest and lowest cost was $16,668. The gap was $10, 615 for hip fracture repair, and $12,988 for a colectomy.

The community in which a hospital is situated will also cause surgical costs to vary widely. In 2012, the California Public Interest Research Group (CALPIRG) Education Fund, a consumer watchdog organization, studied geographic variations in the state’s hospital charges for similar surgeries and found that facilities in California’s highest-priced region charged up to 2.7 times as much for the same surgery as did hospitals in the lowest-priced region.

Some examples:
  • In the San Mateo region, a typical Cesarean section cost nearly $48,000, but it was only $24,349 in Folsom. In Fresno, the charge was less than $13,000.
  • In 2010, knee replacement surgery performed in Fresno cost $46,800, versus $127,500 in Alameda County.
  • An angioplasty cost $144,922 in the San Jose area, $85,520 in Sacramento and $44,400 in Bakersfield.
  • Hysterectomies through the abdomen cost $83,172 in Contra Costa County, $47,500 in Sacramento and $34,400 in Orange County.

Paying for Hospital Stays and Surgery

In 2011, Medicare spent about $549 billion for benefit expenses; 24 percent of that amount — approximately $158 billion — was spent on inpatient hospital services. Approximately 36 million patients per year are admitted to U.S. hospitals, and Medicare pays 90 percent of the costs for almost 42 percent of them. Overall, Medicare payments account for almost 28 percent of all hospital care costs.

Medicaid pays about 60 percent of its total yearly spending of $438 billion on acute-care services such as hospital care, physician services and prescription drugs. Its share of hospital admissions is about 20 percent, for whom it pays about 89 percent of all hospital costs. Overall, Medicaid pays for approximately 19 percent of all hospital care costs.

Private health insurance pays for approximately 35 percent of all hospital care; out-of-pocket costs comprise 3.2 percent of the total; and 15.2 percent of costs are covered by other sources, including all other public health insurance programs, such as the Children’s Health Insurance Program (CHIP), and programs of the Department of Veterans Affairs (VA) and the Department of Defense (DoD); and other third-party payers including workers’ compensation, and other state and local programs.

Patients may have to pay co-pays, deductibles or the total cost of hospital care and surgery. Anyone having trouble paying their medical debt should talk to a financial professional to discuss debt-relief options, including debt settlement.

Bill Fay

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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