Maine HealthCost

HealthCost Methodology

The information on this site comes from a review of more than 7 million claims from over 40 health insurance plans that covered services provided in Maine from July 1, 2012 to June 30, 2013. Below we describe the method we used to calculate the average cost for each of the approximately 200 medical procedures analyzed. It is important to keep in mind that data on uninsured individuals and individuals with Medicare and Medicaid have yet to be included. It’s also important to keep in mind that actual out-of-pocket costs can vary significantly from one person to another based on many factors—including whether or not a person is insured, the type of insurance he or she has, and the provider he or she chooses to see.

Health care expenses can also vary from one facility to another—even for the same procedure. Costs vary based on the types of patients the facility cares for, the doctors they employ, and the equipment they use. The information provided below explains how the Maine HealthCost website accounts for this variation to provide meaningful averages for approximately 200 medical procedures.

Step 1: Filter the Data

The first step we take is to filter the data by removing incomplete patient encounters, extreme outliers, and indeterminate procedures (see definitions below) from the calculation. Additionally, to protect patient confidentiality, we do not report on procedures with fewer than five claims in the data.

  • Incomplete Encounters: Patient encounters that only include the facility portion or the professional portion are removed.
  • Outliers: Patient encounters with extremely low costs (bottom 1%) or extremely high costs (top 5%) can tug the median higher or lower by one encounter each. To minimize the impact of these extreme cases, patient encounters with costs in the bottom 1% and top 5% are removed for each procedure analyzed.
  • Indeterminate Procedures: Some patients have more than one procedure in a single day. If we cannot determine the primary procedure, the patient encounter is removed.

Step 2: Identify Claims Associated with a Procedure

The second step is to identify the claims associated with a procedure. HealthCost displays the average cost for a given medical procedure based on insurance claims that commercial payers are required to submit to the Maine Health Data Organization.

The total cost is broken down to display the portion of the cost that is paid to the professional (e.g., the doctor, nurse, or other health care practitioner) and the portion that is paid to the facility (e.g., hospital). Only claims with both a professional and facility portion are considered for analysis.

Professional refers to an individual physician or health care practitioner providing direct services to a patient. Facility refers to a hospital, surgical center, diagnostic imaging center, health center, and/or any other entity required to file a claim, using a UB-04 claim form, for all non-professional services rendered.

The average total cost depends on a number of factors, including but not limited to: the procedure provided, patient complexity (explained further below), the frequency of the procedure performed, and any negotiated rates.

Claims are processed in a variety of ways depending on the situation. Let’s look at some examples:

  1. A patient visits her hospital-based cardiologist and has an EKG done by a technician who bills through the hospital’s radiology department. In this example, there would be one facility claim and two professional claims.
  2. A patient visits her cardiologist (who is employed by a hospital), and is then sent to a different facility to have the EKG performed. In this example, there would be two professional claims and two facility claims.
  3. A patient visits her cardiologist in the hospital and has an EKG done by a technician in the same unit. In this example, there might be a single facility claim that includes all associated professional fees.

To identify claims associated with a procedure, we group together different events that occurred during the visit (like seeing the cardiologist and having an EKG). We then determine the primary claim, usually the most expensive, and consider the less-expensive claims as part of the primary claim.

In addition, for some procedures such as X-rays, costs can differ significantly depending on whether the procedure took place during an emergency room visit or an outpatient visit. To accommodate this difference, only the professional and technical charges are used in the calculation. That is, we exclude the emergency room costs and any subsequent evaluation and management costs from the calculation.

Step 3: Calculate the Average Cost

The third step is to calculate the average cost. Mean and median are statistical terms that are similar but different ways of measuring an “average.” The mean, which is calculated by adding up all the values and dividing by the number of observations, has the disadvantage of being affected by values that are very high or very low compared to the rest of the sample. In contrast, the median is the middle value when all the observations are sorted in ascending order. We believe the median is better than the mean for summarizing averages in health care because it represents the amount that a procedure is most likely to cost. The following example helps explain this rationale:

Calculating Costs for Blood Test at two Different Facilities

Patient Facility 1 Costs Facility 2 Costs
Patient A’s Blood Test $50 $50
Patient B’s Blood Test $50 $50
Patient C’s Blood Test $100 $100
Patient D’s Blood Test $100 $100
Patient E’s Blood Test $150 $350
Total Sum of Blood Testing $450 $650
MEDIAN Cost (middle value in list, Patient C) $100 $100
MEAN (Total Cost/Total Number of Tests) $90 $130

In this example, the costs are identical across the two facilities for the first four patients’ blood tests. However, Patient E’s blood test costs $200 more at Facility 2 than at Facility 1. While the median (middle) value remains the same across the two facilities, the mean cost for blood testing is $40 more at Facility 2 (bumped up by the more expensive testing for a single patient, Patient E). The median cost, $100, is more representative of what blood testing costs.

Step 4: Calculate Patient Complexity

The fourth step is to calculate patient complexity by facility. Patient complexity is a risk assessment value that is used to measure the relative health of the patient population served by a given facility for a specific procedure. We apply the Chronic Illness and Disability Payment System developed by the University of California, San Diego. A “weight” is calculated for each patient based on the patient's age, gender, and diagnostic history. This weight is then used to describe the patient’s relative health (which correlates with how expensive his or her care will likely be). All patients' weights at a single facility are then summed over a 12-month period and averaged. The range is broken into five segments using the 10th, 25th, 75th, and 90th percentile breakpoints to define various levels of patient complexity or sickness. The average weight for the patients having a procedure at a facility is then compared to the breakpoints and assigned to a "Very High," "High," "Medium," "Low," or "Very Low" category. Comparing patients to one another in this way provides additional information so the payments reported are evaluated in a fair and accurate manner.