I write about this a lot because it is a source both of inefficiency and of opportunity to lessen health spending. There is a lot of variation in the charge for health care services across payers, across providers, and across geographies. The same service shouldn’t have a dramatically different cost of delivery or price to whomever is paying the bill. But it does. The authors in this study looked at geographic price variation for one payer, Humana, for seven services delivered to its commercial members. I would note that this isn’t the best data source, since Humana is a relatively small player which actually subsequently abandoned the commercial market. But the data is probably representative of actual trends. (JAMA Article)
Prices varied by over 50% for every one of the services, with MRIs, ER visits and basic lipid (fat) level blood tests having the greatest variation. The explanation is likely partly due to relative market power, it can’t be costs because an MRI scan or a blood test should have an underlying cost to deliver that is basically identical everywhere. Or it may be that some providers are just more willing to engage in price gouging to pay fat salaries to management.