This story has been edited to include comment from West Valley Medical Center.
BOISE It's January 2011, and two people in their 70s with Medicare need back surgery. One goes to the local St. Luke's hospital, one goes to Saint Alphonsus. They end up with two sharply different bills, but Medicare picks up the tab at almost exactly the same rate.
Welcome to the brain-twisting world of hospital pricing. The federal government made that world slightly less opaque Wednesday, unveiling what hospitals around the country charge for 100 common groups of services and how much Medicare reimburses the hospitals for performing them.
If the data show any pattern, it's inconsistency. Fainting, kidney failure, lung failure and other common types of problems led to both minor and profound variations in average charges from Southern Idaho hospitals.
The hospitals say the data can be misleading. Each patient is different, and the hospital's charge is a starting point for negotiations. The charges are simply asking prices that Medicare, Medicaid, private insurers and out-of-pocket patients seldom end up paying. The charges may not reflect actual costs, either. Hospitals end each year in the black despite being paid less than their asking prices.
The data also "reflect a small number of cases, and the amount of care, and therefore the amount of payment, will vary from patient to patient," said Elizabeth Duncan, spokeswoman for Saint Alphonsus Health System.
Take hip, knee and ankle joint and reattachment surgeries. Hospitals in the Boise region - defined by Medicare as the Treasure Valley plus the Magic Valley - churned out hundreds of surgeries in this group during the 2011 fiscal year, at least for Medicare patients. It was the most common local procedure covered by Medicare that year. The health insurance program for seniors made average payments to the nonprofit hospitals of about $13,000 to $13,500 each.
Patients who stayed in Ada County for these procedures racked up charges averaging about $36,000 at Saint Alphonsus Regional Medical Center and $30,000 at St. Luke's Regional Medical Center.
Meanwhile, charges at the Saint Alphonsus hospital in Nampa were about $29,000. A few miles away in Caldwell, the for-profit West Valley Medical Center charged $52,000 - and Medicare paid West Valley about $3,000 more than it did to nonprofits.
"It's important to note that the amount patients actually pay has more to do with the type of coverage they have rather than charges," said Wendy McClain, spokeswoman for West Valley, adding that the hospital offers eligible patients charity care or uninsured discounts similar to the negotiated rates they have with private insurers. "Medicare spending per beneficiary at West Valley is actually 6 percent below the state median, which reflects the fact that Medicare reimbursement to West Valley is less on average."
In Twin Falls, these surgeries averaged $26,000, even though that hospital is in the same St. Luke's system that charged about $30,000 in Boise.
It costs more to do business in Boise than in Twin Falls, so medical procedures cost more in Boise, right? That might be true. But back surgeries at St. Luke's in Twin Falls had prices averaging $11,000 higher than at St. Luke's in Boise.
Medicare refused to acknowledge that difference in charges. It cut both hospitals a nearly identical check.
"We are trying to standardize all the prices across the health system," said Ken Dey, spokesman for St. Luke's. "There are different cost structures ... (and) we have separate budgets for each hospital."
Dey said St. Luke's charges can vary depending on the number of patients who undergo a procedure, the cost of labor at a particular hospital, whether St. Luke's had to buy new equipment to perform it and other factors. St. Luke's chargemaster - the internal document a hospital uses to keep track of its asking prices - changes frequently, he said.
"If we were a single-payer system, we could set the price (at) what it costs to do the procedure," he said. But in the current health care system, hospitals set prices higher in anticipation of getting talked down, he said.
"It's like a sticker price on a car," Dey said.
McClain said West Valley encourages patients to research out-of-pocket expenses for medical care and supports transparency in health care. The hospital posts its estimated prices online and has financial counselors available by phone at 455-3713 or 455-3741.
The information released Wednesday doesn't answer the big question: Why do some hospitals around the country charge 20 or even 40 times more than others?
"It doesn't make sense," said Jonathan Blum, director of the government's Center for Medicare.
The higher costs don't reflect better care, he said, and can't be explained by regional economic differences alone.
Audrey Dutton: 377-6448, Twitter: @IDS_Audrey.
The Associated Press contributed.