Price comparison for goods and services within the Sacramento Market.

By David Gibson, MD

With the accelerating demise of the managed care product in Sacramento’s economy, employers and individuals seeking health care insurance coverage are selecting high deductible insurance products. Unending double-digit inflationary trends for insurance coverage drives this trend.

We are belatedly learning Milton Friedman’s admonition that "No one spends someone else’s money as carefully as he spends his own." Within this environment, by default, if not by design, the health care consumer is emerging as the critical decision maker rather than a managed care insurance company that prepackages and manages a health care product.

The problem with this unscripted change lies in the fact that patients, and most physicians, really do not know the cost for goods and services within the health care system. Thus, they are incapable of functioning as the critical decision maker without this information.

A case study

In an effort to shed some light upon the cost discrepancies facing patients that we may refer for services, this cost comparison pricing initiative was initiated. It should be noted that the data presented in this report is not intended to be statistically valid. Its purpose is to alert attending physicians as to the financial consequences, their patients will face based upon the referral decisions they make in the future.

Methodology: The comparison is based upon an actual clinical case. My daughter is an 18-year-old college student athlete with no prior history of chronic illness. During August of this year, she developed an acute URI. This condition was diagnosed as viral in origin after an evaluation and diagnostic testing by her private attending physician. She was thereafter referred to a local ER for infusion of one liter of IV fluid. The services, CPT codes and unit prices for the ER are taken directly from the bill sent to me by the hospital and the subcontracting ER medical group.

The above set of clinical circumstances was presented to the medical directors of local physician owned convenience clinics and physicians in private practice. They were asked to provide comparative pricing data based upon the clinical circumstances presented and the CPT codes listed below. It should be noted, that I was unable to find a physician who could administer a liter of fluid in their office, though most agreed that this would have been a routine office based procedure in the past.

Results: The following table demonstrates the billed charges from the hospital and the prices submitted by the medical director at the convenience clinic.

Fee structure comparison:


CPT Code

Hospital ER Unit Price

Convenience Clinic Price


Ketorolac 30MG/1ML Inj




Dexamethasone 10MG/1ML Inj




Ceftriaxone 1GM Inj





Sodium CL 0.9% 1000cc





Infsn W/WO Meds 0-60 Min





IV T Connector PP




IV Tubing Primary PP




IV Harvard Microbore X SE




IV Catheter Augoguard




Dressing TRPT 2.38 X 2.75





Complt Blood Count (Auto)




Basic Metabolic Panel




Heterophile (Monotest)





ER Level IV




Inj Adm IV EA





Level IV Exam




IV Infusion Therapy












The price comparison for technical services (facility charge, pharmaceuticals, IV solutions and supplies) is 8.6 times greater in the hospital ER vs. the community based convenience clinic. The CPT price comparison for professional services is 4.1 times greater within the ER.

Comments appended to the questionnaire by the responding convenience clinic medical director indicated that if they knew the referring attending physician, they would accept the previously performed diagnostic work-up and omit the examination listed above. Furthermore, the director saw no clinical indication to administer Ceftriaxone.

Thus, the differential in cost, based upon the clinical case presented, increased to a factor of 17.01 ($2432.75 / $143.00) times greater for technical services in the ER vs. the convenience clinic. There would have been no charge for professional services. Thus, the cost differential for the entire therapeutic intervention would have been 19.9 ($2850.05 / $143.00) time greater in the hospital ER as opposed to the convenience clinic.

Discussion: The direction for interventional therapy in health care has moved into the ambulatory environment. Now, 70 percent to 80 percent of all invasive therapeutic procedures are performed on an outpatient basis. That compares to only 15 percent in 1980.

Uninsured and unbudgeted medical debt has a serious effect upon our patients and their families. Medical debt is the leading cause for household bankruptcy in the economy today. If the average household has medical debt in excess of 2% of income, that household is nine times more likely to file for bankruptcy.

There is no comparable circumstance throughout any other segment of the economy that would justify a ten fold mark-up in charges for diagnostic testing and supplies within the hospital ER. The only comparable expectation for return on investment would come from the venture capital segment of the economy. There, a firm will invest with the hope of earning 10 times on their capital contribution. This is justified based upon the reality that only one in five start-up companies will earn that tenfold return by going public. To charge a ten-fold markup on supplies is simply unconscionable.


The health care industry is facing a classic inflection point in its evolution. First dollar coverage for managed care products is no longer a viable product. Accelerating double digit increases for premium prices is now forcing employers and individuals to purchase more cost effective products. These uniformly entail indemnity products with high deductible levels.

Your patients are now vulnerable to the cost of goods and services that they receive from health care providers in Sacramento. They will be looking to you, as their physician, to mitigate the financial liability they will be facing. It is therefore incumbent upon physicians to investigate the cost differentials involved in various therapeutic options you utilize in the future.

© David J. Gibson, MD 2001