May 21, 2024

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Hospitals charge employer health plans more than 2 times what they charge Medicare for same services


Table of Contents

Dive Brief:

  • Employers and private insurers paid 224% of what Medicare would pay for the same services at the same facilities across all hospital inpatient and outpatient services on average in 2020, according to a Rand study funded by the Robert Wood Johnson Foundation.
  • Researchers found significant variations in those prices across states. For instance, Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while other states like Florida, West Virginia and South Carolina had relative prices at or above 310% of Medicare.
  • Price variations by state are more attributable to hospital market power than each hospital’s share of patients covered by Medicare or Medicaid, according to the report released Tuesday.

Dive Insight:

The findings illustrate just how broadly prices for healthcare services can vary based on a patients’ insurance coverage and which state they receive care in.

Despite recent price transparency regulations designed to help consumers shop around for services, employers that provide most private insurance often don’t have usable information on prices negotiated with hospitals on their behalf, researchers wrote.

About 157 million Americans got health coverage through an employer or union in 2020, according to data from the Kaiser Family Foundation.

The latest figures are a slight improvement from Rand’s previous 2018 study, when employers and private insurers paid 247% more on average than Medicare for the same services and the same facilities, according to the report. That’s mostly attributable to a boost in the volume of claims from states with prices below the previous mean price, the researchers said.

For COVID-19 hospitalizations, employers and private insurers paid on average 241% more than what Medicare would pay in 2020, the report, based on claims data from over 4,000 hospitals and over 4,000 ambulatory surgery centers in every state except Maryland, found.

Researchers also found variations between different sites of care.

Looking at five common procedures done in both ambulatory surgical centers and hospital outpatient departments, the average price in the outpatient department was $6,169 while the average ASC price was $2,404.

While commercial prices for ASC services rose slightly faster than Medicare prices over the study period, they remained well below relative prices for the same services in hospital outpatient departments.

Employers and private insurers paid about 162% more than Medicare for common outpatient services done in ambulatory surgery centers.

But if ASCs were paid the same as hospital outpatient departments in Medicare, the prices for those services would have averaged 117% of Medicare payments, the study found.

The American Hospital Association pushed back on the findings, saying “researchers should expect variation in the cost of delivering services across the wide range of U.S. hospitals — from rural critical access hospitals to large academic medical centers,” according to a statement from CEO Rick Pollack.

The AHA also said the report looks at 2.2% of overall hospital spending, and the average price for hospital services declined as Rand added more claims in the latest report compared to past reports. Pollack said in the statement “you simply cannot draw credible conclusions from such a limited and biased set of claims.”


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