A knee replacement is a major medical procedure. It requires a skilled surgical team, specialized equipment and careful follow-up care.
But should the price of that same procedure vary by more than $20,000 simply because of where a patient receives it?
That is happening right here in North Carolina.
A recent KFF Health News investigation highlights striking differences in hospital prices for routine care. According to pricing data, a knee replacement under the same Blue Cross Blue Shield health plan cost about $16,000 at Catawba Valley Medical Center in Hickory and around $40,000 at Mission Hospital in Asheville.
Now, there are legitimate differences between hospitals. Mission Hospital, for example, is significantly larger and serves as a Level I trauma center. Maintaining the specialized staff, equipment and around-the-clock capacity needed for complex and emergency care costs more – and those differences can justify higher payments when patients need that level of care.
But those differences should not be a blank check for dramatically higher prices on routine services. When the clinical requirements are similar – as they are for many knee replacements, MRIs and other outpatient procedures – the price should not vary simply because one facility is owned by a hospital system.
For routine services that can be safely provided in different settings, North Carolina should embrace a simple principle: the price should reflect the care a patient receives, not whether a hospital system owns the building where the care is delivered.
That approach is known as site-neutral payment, and it would go a long way in making healthcare more affordable in North Carolina.
The Same Care Should Not Come With a Different Price Tag
Site-neutral payment is a straightforward idea: when the same routine service can be safely provided in different settings, payment should generally reflect the care a patient receives, not whether a hospital system owns the facility.
Today, that is often not how the system works.
When a hospital acquires an independent physician practice, the doctor may be the same. The office may be the same. The service may be the same. But the price can increase because the ownership of the facility changed.
A common-sense site-neutral policy would not mean paying every provider the exact same amount for every service under every circumstance. Some patients have more complex medical needs. Some hospitals provide trauma services, emergency care and other resources that are not available at a typical physician office or outpatient facility. Those differences matter.
The goal is to align payments for routine outpatient services that can safely be provided in different settings, while preserving appropriate safeguards for patient safety and quality. Put simply: when the service is the same and the setting is appropriate, payment should not increase simply because a hospital system owns the facility.
Affordability Requires Following the Costs All the Way to the Premium
The debate over hospital prices can sometimes feel disconnected from everyday life.
It should not.
When a hospital charges more, someone has to pay the bill. Patients may pay directly through deductibles and coinsurance. Employers pay more to provide health benefits. Health plans pay more for medical care. And those higher medical costs eventually show up in the price of health insurance.
The price negotiated for a knee replacement in Asheville affects what a statewide health plan spends on medical care. Those medical costs help determine what must be collected in premiums – and those premiums are ultimately paid by employers and workers throughout North Carolina.
That is the economic chain connecting hospital prices to household budgets.
A family may never see the $24,000 difference between two knee replacement prices on a bill. But families can still pay for higher healthcare prices through rising premiums, larger deductibles and slower wage growth as employers devote more resources to employee health benefits.
That is why healthcare affordability requires looking beyond insurance premiums alone and asking what is driving the cost underneath them. Reducing unnecessary variation in healthcare prices can matter even to people who never undergo the particular procedure being discussed.
With North Carolina being among the most expensive states for healthcare in the country, policymakers should have site-neutrality at the top of their to-do lists.
