Inpatient Hospital Costs by Region
In 2023, inpatient hospital costs per discharge were higher in northern California regions than southern California regions in the commercial and Medicare markets. This trend holds across different types of inpatient stays, payer types, age groups, and the severity of patient condition.
Introduction
The Inpatient Hospital Costs by Region report presents cost and utilization information for acute hospital inpatient stays by region and type of stay (defined by Medicare Severity Diagnosis-Related Groups) in California in 2023. These visualizations are made with data collected as part of HCAI’s Healthcare Payments Data (HPD) program.
The focus of this report is the overall cost of the care provided during an inpatient hospital stay, which is the sum of the allowed amount on all facility and all professional claims associated with the stay. Patients may pay a portion of this allowed amount through copays, coinsurance, or deductibles. The visualization provides a comparison of median inpatient hospital costs per stay across all 19 Covered California regions in 2023 and can be grouped by the type of inpatient stay, major payer type, geographical region, and age group.
The severity of the patient’s conditions and the complexity of the procedures performed can be a significant source of cost variation. The MS-DRG weight considers these differences in a patient’s condition and resources needed for care. It is used in this report to calculate a severity-adjusted cost which provides a standardized amount and increases comparability by payer and across regions. Note that both the adjusted and unadjusted amounts represent the cost of medical care to payers and patients, which is distinct from the cost to hospitals and providers for rendering that care. This report focuses on costs at the regional level, not the hospital level. For details on measures and methodologies, please refer to the Technical Note.
The visualization in this report can answer a range of questions about the commercial and Medicare markets, such as:
- How many cesarean sections were performed in the Greater Sacramento region in 2023, and what was the median cost for the associated inpatient hospital stay? How does that compare to the median cost for people who had a cesarean section in Orange County? Are those higher or lower than the statewide median cost for cesarean sections?
- For people with commercial insurance, what is the statewide median cost for an inpatient stay in 2023? Does the median cost differ based on age group? How do the median cost and inpatient utilization for this group compare to people with Medicare Advantage and Traditional Medicare coverage?
- How does median cost of an inpatient stay relate to stay severity? Does variation in severity for the same type of inpatient stay explain differences in cost across regions, in which more severe stays lead to higher cost? If median cost is adjusted by severities, does it minimize the differences across regions?
Key Findings
In 2023, the median cost for an inpatient hospital stay covered with insurance in California was $18,512. All northern Covered California regions, except for the Northern Counties region, report a median inpatient cost per stay exceeding this statewide figure. Notably, the San Francisco Region records the highest median inpatient cost ($27,058). Of all southern Covered California regions, only Los Angeles County West reports a median ($18,752) marginally above the statewide median.
However, some regions with facilities that treat high-severity or high-cost health conditions may report higher costs than those that provide care for more routine or low-severity health issues. A severity-adjusted cost using MS-DRG weights shows similar patterns of cost variation but to a lesser extent if patients had comparable levels of severity per discharge. The San Francisco Region again records the highest median inpatient cost ($16,326) even with the highest median severity (1.5). After severity adjustments, Orange County is the only southern region reporting an adjusted median cost ($13,147) higher than the statewide median, while the median cost in Los Angeles County West ($12,171) is now below the statewide median. The statewide median severity adjusted cost is $12,192 per discharge.
- These region differences are found across most types of stays. For instance, the median inpatient costs for both cesarean sections and vaginal deliveries are greater than the statewide median for several northern regions.
- These Northern and Southern region differences in median inpatient costs are smaller within the 65+ age group compared to other age groups.
- Comparing the median inpatient cost across payer types, commercial plans have the highest median cost ($25,200, $23,465 adjusted), followed by Traditional Medicare ($17,201, $11,363 adjusted), and Medicare Advantage plans ($16,109, $11,166 adjusted).
Visualization
Notes: Discharges paid by Medi-Cal are excluded from the current version. This analysis incorporates 2023 inpatient discharge claims and encounters, accounting for costs associated with both inpatient facility services and professional services during each inpatient stay. Inpatient hospital costs are calculated from the allowed amounts on medical claims and encounter records. Allowed amounts are distinct from the costs hospitals and providers incur to administer care. Hospital-level variations in cost are not reported in this dashboard.
The drop-down menus allow the user to filter the results by type of inpatient stay, payer type (Commercial, Medicare Advantage, or Traditional Medicare), and age range (0-18,19-64, or 65+). Each drop-down menu includes an “All” option to view the median inpatient cost in each region across all subgroups.
- The top table presents the statewide discharge count and median cost (allowed amount) enabling direct comparison of regional data against the state-level benchmarks. Hovering over either figure displays the statewide median cost, median stay severity (based on Diagnosis-Related Group or DRG severity weight), and median length of stay and their respective interquartile ranges (IQRs). The IQR is the range between the 25th and 75th percentiles, representing the middle 50% of the data distribution.
- The dot markers represent the median cost for each region while the orange bars represent the 25th and 75th percentiles and the IQR of inpatient hospital costs.
- Hovering over a dot marker displays the median cost, cost IQR, and inpatient discharge count for the selected region and any payer or age group filter selections in a tooltip. The tooltip also highlights inpatient stay intensity by showing the medians and IQRs of stay severity and length of stay.
- A button at the top of the dashboard allows users to alternate views showing either the “Severity-Adjusted Cost” or “Unadjusted Cost” metrics.
Glossary
Type of Inpatient Stay
Medicare Severity Diagnosis-Related Groups (MS-DRGs) are categories of inpatient stays with similar clinical conditions, severity (based on complications and comorbidities), and expected resource use for treatment. A DRG is assigned to each inpatient discharge in HPD using the MS-DRG grouper software (version 42) and is based on patients’ diagnoses and treatment. To reduce data suppression from small discharge counts, similar DRGs were grouped into broader DRG categories. For example, 20 spinal fusion procedures were grouped into a single “Spinal Fusion” category regardless of the type of procedure or severity. A table detailing the individual DRGs grouped into each category are included in the Technical Note.
Cost per Stay (Allowed Amount)
Inpatient Hospital Cost is calculated using the allowed amount field in HPD claims and encounters (referred to as “claims” hereafter) and consists of the sum of the allowed amounts on all facility and professional claims incurred during an inpatient hospital stay between admission and discharge. For claims paid under a fee-for-service (FFS) or other non-capitation arrangement, the allowed amount represents the payment from the health insurance plan to the provider for services rendered. A portion of this amount may be paid by the patient in the form of a copay, coinsurance, or a deductible. For encounters under a capitation payment arrangement, the allowed amount is a “fee-for-service equivalent”, which is an estimate of the amount the provider would have received had the health plan paid for the service under an FFS or other non-capitation arrangement. The FFS equivalent amounts used in this report include values reported by HPD data submitters as well as HPD’s imputed FFS equivalent in cases where a submitter-reported value is unavailable. For detail on HPD imputed allowed amounts, please see the FFS Equivalent Imputation documentation.
Regional differences in population and available facilities can influence the types of stays and therefore impact the cost of care. Regions with more facilities that treat severe or high-cost health conditions are likely to report higher costs than those that provide care for more routine or low-severity health issues. To account for some of these differences in the type of care provided, a separate severity-adjusted cost is calculated for each discharge using the MS-DRG severity weight assigned to each discharge. Users have the option to compare medians using either the severity-adjusted or unadjusted costs.
Stay Severity
The MS-DRG grouper software assigns a DRG severity weight to each inpatient discharge. The median weight per stay and IQR are reported to provide context to the interpretation of cost variations across regions, payers, and types of stays.
Length of Stay
The total duration of an inpatient stay. The median length per stay and IQR are reported to provide context to the interpretation of cost variations across regions, payers, and types of stays.
Covered California Regions
Covered California Regions divide California into 19 pricing regions, which helps Covered California to determine which plans are offered and the rate of health insurance plan coverage. Some Covered California regions consist of one individual county, while others include multiple counties. The region of each discharge is based on the location of the billing provider. It is not based on the patient’s residential location or the location of the provider that rendered the service.
Payer Type
Payers are the companies, programs, and organizations that oversee insurance plans and reimburse healthcare providers.
- Commercial: Insurance products for which the coverage premium is paid by a private party, such as an employer, individual, or other entity.
- Medicare: A federal health insurance program overseen by the Centers for Medicare & Medicaid Services (CMS), typically for individuals over 65 years of age or individuals with disabilities.
- Traditional Medicare: A federal Medicare program managed and administered by CMS that provides Hospital (Part A) and Medical (Part B) coverage.
- Medicare Advantage: A federal Medicare program administered through commercial insurers; also known as Medicare Part C or Medicare Managed Care. This includes specialized managed care programs such as Special Needs Plans (SNP).
Notes:
– Medicare beneficiaries who are eligible for both Medicare and Medi-Cal (“dual eligibles”) and covered under a Medicare Advantage Dual Eligible Special Needs Plans (D-SNP) are counted under the Medicare Advantage payer type.
– Inpatient stays paid by Medi-Cal are excluded from the current version due to incomplete payment information on some facility claims in 2023. Future versions will include the corrected data.
Age Range
Members were grouped into one of three age bands: 0 to 18, 19 to 64, 65+, based on their age at the end of the year.
How HCAI Created This Product
This product was developed using medical claims data submitted to HCAI’s Healthcare Payments Data (HPD) program, California’s All-Payer Claims Database (APCD).
- Only hospital inpatient and associated professional services with admission and discharge dates during 2023 are included.
- Only acute inpatient hospital discharges are included in this report. Swing Bed, Skilled Nursing Facility (SNF), Intermediate Care Facility (ICF), and Residential Facility discharges are not included.
- The HPD Program identifies and tracks the unique identity of individuals across different payers over time. The approach is continually refined to ensure an accurate count of unique individuals. As these methods improve, the HPD Program expects to identify more linkages – cases in which two or more records are determined to belong to a single individual.
- To protect patient personal information, the California Health and Human Services Agency has adopted a policy of statistically masking or de-identifying sensitive data (CalHHS Data De-Identification Guidelines). Discharge counts from any group with less than 30 individuals are suppressed in this report. All other counts are rounded to the nearest 10 to prevent the unmasking of suppressed data.
- Additional information on how HCAI created this product is available in the report’s Technical Note.
Additional Information
Topic: Cost Transparency
Source Link: Cost Transparency – Healthcare Payments Database
Citation: HCAI – Healthcare Payments Database – Inpatient Hospital Costs by Region, 2023
Temporal Coverage: 2023
Spatial/Geographic Coverage: Statewide, Region
Frequency: Annually