Employers have been grappling with the widely varying prices medical providers in different regions of the U.S. charge for the same procedure. A report that offers a highly detailed look at those variances is certain to be discouraging to those trying to rein in health insurance plan costs.

The Health Care Cost Institute (HCCI) studied the prices charged fort 240 medical procedures in states and cities around the nation. (Nine states weren’t included in the study due to lack of data.) The report, National Chartbook of Health Care Prices, reveals a shocking range of prices charged for the same procedure.

As have other similar studies, the HCCI’s culled out the cost for a knee replacement. It’s a commonly used benchmark; the surgery is generally not an emergency procedure, the steps involved are well documented, and most employer plans cover it. The authors offered these comparisons to highlight the nature of the problem:

California

Riverside: $30,261
Sacramento: $57,504

Florida

Miami: $27,115
Palm Bay: $44,237

New York

Syracuse: $24,131
New York City: $36,584

Some states had little variation at all within their borders. Virginians pay $39,292 for a new replacement in Richmond, and $39,298 in Virginia Beach.

State-by-state comparisons are eye-popping, with Arizona emerging as generally the least expensive state for most procedures studied. For instance, a knee replacement there costs an average of $21,976 to $38,000 less than charged by health care providers in Sacramento. Alaska is generally the most expensive state, not surprising given the exclusive market providers there enjoy.

While the cheaper states tend to be in the south — Texas, Louisiana, Florida, Tennessee, Georgia, and Kentucky are all below the national average — there is only one clear regional pattern: New England is expensive. Joining Alaska in the most expensive states club are New Hampshire, Wisconsin, Minnesota, and North Dakota, with Maine, Massachusetts, Connecticut, and Rhode Island all above average. Others that are below average included Maryland, Ohio, New York, California, Nevada and Utah, while Oregon and Washington are above.

What drives these differences? “While some price variation can be attributed to differences in wages or rent, the remaining variation is most likely due to differences in underlying market dynamics, such as lack of transparency, market power, or the availability of alternative treatments,” the authors said.

For instance, the consolidation of hospital systems leads to market domination and the ability to set prices higher due to the lack of competition, they said.

The study’s results may be discouraging for plan sponsors working toward more consistent prices for the same procedures. But, HCCI said, information is power.

“These data enable policymakers, payers and consumers to see where prices for health care are highest compared to the national average and neighboring states, and begin to explore why these differences exist,” said HCCI Executive Director David Newman. “We hope states use this information to design appropriate solutions to address potentially unnecessary price variation.”

Instant Insights /

Study finds shocking regional variation in medical charges

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