PRINCETON, N.J. – Len Charlap, a retired math professor, has had two outpatient echocardiograms in the past three years that scanned the valves of his heart. The first, performed by a technician at a community hospital near his home here in central New Jersey, lasted less than 30 minutes. The next, at a premier academic medical center in Boston, took three times as long and involved a cardiologist.
And yet, when he saw the charges, the numbers seemed backward: The community hospital had charged about $5,500, while the Harvard teaching hospital had billed $1,400 for the much more elaborate test.
“Why would that be?” Charlap asked. “It really bothered me.”
Testing has become to the United States’ medical system what liquor is to the hospitality industry: a profit center with large and often arbitrary markups. From a medical perspective, blood work, tests and scans are tools to help physicians diagnose and monitor disease. But from a business perspective, they are opportunities to bring in revenue – especially because the equipment to perform them has generally become far cheaper, smaller and more highly mechanized in the past two decades.
And echocardiograms – ultrasound pictures of the heart – are enticing because they are painless and have no side effects – unlike CT scans, blood draws, colonoscopies or magnetic resonance imaging tests, where concerns about issues like radiation and discomfort may be limiting. Though the machines that perform them were revolutionary and expensive when they first came into practice in the 1970s, the costs have dropped considerably. Now, there are even pocket-size devices that sell for as little as $5,000 and suffice for some types of examinations.
“Old technology should be like old TVs: The price should go down,” said Dr. Naoki Ikegami, a health-systems expert at Keio University School of Medicine in Tokyo, who is also affiliated with the University of Pennsylvania’s business school. “One of the things about the U.S. health-care system is that it defies the laws of economics, and of gravity. Once the price is high, it just stays there.”
In other countries, regulators set what are deemed fair charges, which include built-in profit. In Belgium, the allowable charge for an echocardiogram is $80, and in Germany, it is $115. In Japan, the price ranges from $50 for an older version to $88 for the newest, Ikegami said.
Because Charlap is on Medicare, which is aggressive in setting rates, he paid only about $80 toward the approximately $500 fee Medicare allows. But many private insurers continue to reimburse generously for echocardiograms billed at thousands of dollars, said Dr. Seth I. Stein, a New York physician who researches data on radiology. Hospitals pursue patients who are uninsured or underinsured for those payments, he added.
And American doctors, clinics and hospitals tend to order lots of tests.
“It’s one of the most lucrative revenue streams they have,” said Dr. Eric J. Topol, a cardiologist at Scripps Health in San Diego who studies echocardiography. “At many hospitals, the threshold for ordering an echocardiogram is the presence of a heart.”
