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Gen Villa lives in Salinas, California, and she told us that a few years ago, when she went into labor with her second child, things moved really quickly.
My water broke in the middle of the night and I was like, okay, well, let me take a shour and get ready, but my partner's like, no, we got to go.
They got in the car and drove forty five minutes north across county lines to a hospital in Santa Cruz.
My contractions were getting shorter and shorter, and then when we arrived they asked how what would been timing them, and it was like a couple of minutes. So they rushed me into the room and as they were registering me in my room, I was giving birth.
The reason the timing was so tight, the reason Jen chose to go to a hospital almost an hour away. It's not because it was the closest option. In fact, the closest hospital to her home is only about half a mile away.
Like I could probably drive there and get there maybe in the same minute.
The reason Jen and her partner made that middle of the night drive came down to money. When Jen gave birth in Santa Cruz County. The tab was about eighty three hundred dollars, but if she had given birth at a hospital in the county where she lives, the cost could have been more than forty thousand dollars. Today, on the show Bloomberg News Crunch, the data on hospital pricing around the country. What they found reveals a new picture of just how much healthcare prices can vary, even just
a few miles apart. I'm Sarah Holder and this is big take from Bloomberg News. Gen Via started thinking about having a second child after she moved to Salinas.
Mind you, it was like planned, so I was kind of like looking into like when's the beeth time.
Where's the doctor's She was thinking about who could deliver the baby because the obgin she had wasn't in network, and Jen knew having a baby with an out of network doctor would be expensive. She needed some guidance. Jenn's a special education teacher, and so she turned to the head of her teachers' union for advice.
What do I do you know? Like, how do I start this? Since I wasn't pregnant yet? She said, like, you could you have time to just change your insurance is just going to be a lot more if you want to have your baby and keep your doctor. And I said, okay, so how much more? And then when it was like about a thousand more, it's like, I'll drive.
A thousand dollars more a month. That's how much more. Jen says she would have to pay to get a health insurance plan that would allow her to get care from the hospital closest to her home, and not just that hospital. Her insurance wouldn't cover her giving birth at any of the three hospitals in her county, which are among the most expensive in the country.
My first reactions like, you gotta be kidding me, are you serious? Okay, well, financially, one makes way more sense than the other, so I'm gonna do this, But like, how dare them? Like how is this okay? Like how is okay that I people that work in the hospital, I'm teaching your kids, you know, like I'm working to better our community as a whole, but I can't use the hospital.
Gen's experience is sort of an extreme situation because of the place she lives and the price levels there that are so high.
That's my colleague John Tazzi. He covers all things related to the cost of healthcare in the US.
But everyone in the United States who has commercial insurance is sort of exposed to this problem, right.
John and his colleagues recently got an up close look at this problem when they cunched some data on hospital pricing collected by a research group called the Rand Corporation, and they found pricing disparities like the one gen Via described all over the country.
In New York City, in Texas, in Indiana, pretty much everywhere you look where there are multiple hospitals, there are lower cost or higher cost options within a certain range.
In total, John and his team found more than three hundred and fifty hospitals that had significantly lower cost competitors within just five miles.
And if patients were willing to travel thirty miles, almost half of US hospitals have a significantly less expensive competitor within thirty miles.
So why would it cost thousands more dollars in one county and then in another county thirty miles over it would be a lot cheaper.
It's a very good question.
It's the question.
It's the question. It's the question of American healthcare.
Have you talked to hospitals where they're charging more than other people nearby, what do they say about their prices?
Yeah, so, I mean in general, the hospital industry kind of says that this variation in and of itself is not a problem because hospitals do have different cost structures in different of the patients they see. Some of the hospitals say that they are financially at risk and that they need to you know, they see other hospitals, particularly in rural areas, closing, so that they need to make sure they are charging a price that will sustain their operations.
But I think, you know, whenever we hear assertions from the industry that they need higher reimbursements from ultimately it's all paid for by patients or tax payers, I think we should scrutinize claims that we need to pay more for what we're getting.
Well, do the people who end up paying more get better care?
So there is a lot of research trying to understand the relationship between price and quality. We should say measuring quality and healthcare is pretty challenging in some ways. Some hospitals might have like really top quality cardiac care not as good quality, or thepedic care, and so I think you need to be really kind of clear and specific about what you're comparing when you're trying to do that sort of analysis. But in general, the answers know that higher cost care is not better quality.
How clear is this to consumers? Do people generally know they can get cheaper care as close as a couple miles away.
I think most consumers are largely baffled and confused every time they interact with the healthcare system, So as a baseline, I would say no.
Part of the reason why the cost of healthcare can be so confusing is that many people don't pay for it directly. They pay their insurance company, and then their insurance company negotiates the prices with the provider, And for a long time, even if you wanted to look up how much something would cost at different hospitals, it was hard to do.
Until relatively recently, all these kind of prices and contracts were private. They were hidden, they were secret, they were not public by default.
That started to change in recent years due to new regulations under the Trump and Biden administrations that require hospitals to publish their prices. But John Say's compliance has been slow, and we're still a long way off from a world where it's easy for individual patients to find the most affordable care.
For twenty odd years now, in the US, there's been a movement toward trying to make consumers, you know, patients people need healthcare into shoppers, consumers who will compare price and quality and make the best decisions based on that information. There are now various websites and places where you can
try to compare pricing. I would say it's still really hard, and like, particularly for people who are maybe having a medical crisis, maybe kind of overwhelmed by other things the time, it's a high bar to kind of like ask people to do complicated analysis and try to weigh trade offs between price and quality, right and like figure out Like,
it's hard, it's really hard. So I would say, you know, even if consumers know that there's potentially other options, trying to do that decision making on your own is really challenging. We're looking at a part of our economy and a part of our lives that we have like designated to the market, Unlike a lot of countries have decided that we're going to use a market approach to commercial healthcare. In the US, and it's not working.
So we've got this big problem in pricing. What do we do about it? After the break, we visit a place that has taken steps to get hospital pricing disparities under control. Out of all the data John and his team analyze, he said, there was one state that's led the way on addressing hospital pricing disparities.
So in some ways, the state of Indiana's kind of ground zero for what we're talking about here.
Back in twenty sixteen, John says, an employer's group called the Employer's Form of Indiana got concerned that hospital pricing in their state was getting out of hand.
And they said to some economists that RAND, Hey, can you help us understand this.
RAND that's the research group that collected data on hospital pricing. RAND compared what hospitals in the state were charging patients with commercial insurance versus what they were getting paid for patients on Medicare, and they found that many of the hospitals in Indiana were unusually expensive, including the state's largest health system, Indiana University Health.
That kind of led employers in Indiana to be pretty upset about what they were paying. They didn't understand why they were paying so much, and people in other states weren't necessarily paying as much.
How did prices at Indiana University Health get so high?
I don't think there's one clear answer. One thing they did say is, you know, like a lot of big hospital systems, they've made acquisitions in recent years, they've absorbed smaller hospitals. Some of those hospitals had existing contracts with insurers, so they sort of inherited different prices. But you know,
I think how they got so high. Again, that's sort of the fundamental question of like all of this that we don't really have a good answer to, except that those are the prices that insurance companies agreed to pay.
Bloomberg News asked to interview executives from each of the fifty hospital systems across the country that Rand identified as the most expensive. Indiana University Health was the only one that agreed.
When we talked to the hospital, they didn't dispute that this was an issue. They actually said that they're trying to make affordability part of their strategy, and they have pledged to kind of get their prices in line at least with national average is over a five year.
Period, Indiana University Health pledged to start cutting prices in twenty twenty, and since then, ambulance charges have fallen twenty four percent, pharmacy services are down by thirty percent, and radiology prices are now almost half of what they used to be. John says it's a rare example of a hospital group responding to pressure to bring their prices down.
So I think in Indiana you have a story of a really engaged group of employers that really put this issue on the map with data, They brought it to legislators, They kind of made a political issue over hospital prices, and that has at least begun to kind of trickle into both policy changes but on some market changes where we see IU Health responding to some of these concerns.
So I think the question to watch over the next few years is like, first of all, what happens in Indiana to overall cops, But then do we start to see that kind of nationally right, do more hospitals come out and say, hey, we understand there's a problem here and we're gonna try and shift some things to address it. I think we are seeing this increasingly as a political issue, but in terms of like the public pressure on hospitals.
It's nowhere near like you look at pharma. I mean, every politician is talking about drug prices constantly, even though we spend far more on hospital care. Right So, I think it'll be interesting to watch how this plays out nationally over the next few years. John, thanks so much, Thanks so much for having me.
Thanks for listening to Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by David Fox. It was edited by Caitlin Kenny and Timinette. It was mixed by Blake Maples. It was fact checked by Tiffany Choi. Our senior producers are Naomi Shaven and Jilda Decarly. We get editorial direction from Elizabeth Ponso. Nicole Beemster Bore is our executive producer. Sage Bauman is Bloomberg's head of Podcasts. Thanks for tuning in. We'll be back tomorrow.