Medical Bill Hospitals are likeany other business trying to make a profit; they can ask more froma company like an insurer than they can from an individual. (Photo:Shutterstock)

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Kim Daniels didn't have to pay a penny for her double mastectomy or thereconstructive surgery she had after treatment for breast cancer in June 2018. Her healthinsurance, PennCare, administered through Independence Blue Crossin Pennsylvania, fully covered both procedures.

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Knowing that, cost wasn't an issue for Daniels when selectingthe type of breast implants. She asked her plastic surgeon at theHospital of the University of Pennsylvania, “If I were your wife,what would you [choose]?” He went with Mentor MemoryGelimplants.

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According to Daniels' hospital bill, those implants came with a pricetag of $3,500 apiece, or $7,000 total.

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Related: Consumers more likely to pay hospital bills ifcosts are clear

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Such a high charge for the exact same item would have beenunthinkable if the procedure was cosmetic breast augmentation,which is generally not covered by health insurance. When patientspick up the tab, cosmetic surgery packages for breast augmentationcost about the same — $7,000 — but that includes the doctor's fee,implants, operating room time and anesthesia.

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The radical difference in price demonstrates in stark numericalterms how costs often depend on who is paying the bill.

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Dr. Anupam Jena, a health economist at Harvard Medical School,said it's precisely because cosmetic patients pay out-of-pocketthat their costs for implants are far lower than what hospitalscharge reconstructive patients.

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“Cosmetic surgery providers have to compete with each other,” hesaid, and “one of the big ways they're going to compete is tocompete on price.”

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“Whatever the cost is for the implant, they can't up-charge toomuch, or a patient will just go somewhere else.”

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Dr. Alex Sobel, a cosmetic surgeon and president of the AmericanBoard of Cosmetic Surgery, said the price he charges cosmeticpatients for breast implants is pretty close to the price he paysfor the implants from the manufacturer. High-end implants likeDaniels' would be priced at a maximum of $3,000 for a set, headded, if Daniels had been undergoing cosmetic breast augmentationsurgery.

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Sobel operates a cosmetic surgery practice in Bellevue, Wash.,which is in the region of the U.S. with the highest cost range forcosmetic breast surgeries. He said he usually pays around $250 to$700 per implant for saline and $700 to $1,000 per implant forsilicone. The most expensive form — stable silicone or “gummy bear”implants — are usually priced around $1,350 each.

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Similarly, Dr. Brent Rosen, a cosmetic surgeon with a practicein a northern suburb of Philadelphia, said the silicone implants hebuys range from $1,500 to $2,000 per individual implant.

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For the entire cosmetic breast augmentation procedure withsilicone implants Rosen charges $6,500. That's $500 less than thecharge for just Daniels' silicone implants at the nearby Hospitalof the University of Pennsylvania.

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Jena, the Harvard health economist, said the reason behind manyof these price markups is that hospitals are like any otherbusiness trying to make a profit. They can ask more from a companylike an insurer than they can from an individual.

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“Why does Apple charge $1,000 for an iPhone? It doesn't costthat much to make an iPhone. It's so they can extract surplusmoney. Same goes for hospitals,” said Jena.

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Breast implants are just one example of how medical devices aresignificantly marked up by hospitals.

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A 2017study published in JAMA found that for knee and hip implants,insurance companies were paying double what the hospitals paid whenthey purchased the implants from manufacturers.

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It is hard to define a reasonable manufacturing cost orwholesale price for a medical-grade bag of silicone. MentorWorldwide and Allergan, the two biggest manufacturers of breastimplants in the U.S., declined to share their products' wholesalecosts or their price negotiation practices with providers.Manufacturers regard their pricing as a trade secret.

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Hospitals typically obtain medical devices through health caregroup purchasing organizations, which are supposed to negotiatewith manufacturers to get lower costs for items. Bigger hospitalsor providers that offer to use more of a certain product often getsteep discounts over wholesale.

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In 2016, Medicare, which has huge leverage in negotiations, paid$516.59 for a “silicone or equivalent breast prosthesis.”

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So, the hospital markup for patients who pay for the procedureor are commercially insured is even more extraordinary.

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A Penn Medicine spokesperson told KHN in an email that they wereunable to comment on specific patient cases, but that the hospitalreceives a single “case rate” or bundled payment for all breastreconstruction surgeries and that reimbursement is not related tothe type of breast implant chosen.

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Of course, when dealing with powerful insurance companies,hospitals don't get paid the full asking price conveyed on theirbills. The price is often merely the starting point fornegotiations with insurers.

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“Hospitals are absolutely marking up the prices for medicaldevices,” said Jeffrey McCullough, a health policy professor at theUniversity of Michigan. But, he added, “you can almost guaranteethe list price you see on a hospital bill is not what the hospitalis getting paid by insurance companies,” which bargain fordiscounts.

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Even so, not all patients have health insurance coverage ascomprehensive as Kim Daniels'. In such cases, all or part of thehospital's high charge for breast implants could be billed directlyto patients.

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“If you don't have an insurance company bargaining on yourbehalf, the default is to charge the patient,” McCullough said.

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KHN's coverage of women's health care issues is supported inpart by The David and LucilePackard Foundation.

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Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.


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