Hospitals Charged Employers And Insurers 254% More Than Medicare In 2022: Study

Dive Brief:

• Employers and private insurers continue to pay hospitals more for inpatient and outpatient services than Medicare would have reimbursed, according to a new study from policy think tank the RAND Corporation.
• In 2022, private insurers and employers paid on average 254% of what Medicare would have paid for the same care services — up from 224% two years prior. 
• Health systems often argue they hike up commercial rates to offset losses from government underpayments, according to the study. However, a hospital’s market share, rather than population of Medicare or Medicaid patients, more accurately predicted pricing, with larger health systems charging higher prices.

Dive Insight:

Since 2021, health systems and insurers have been required to post pricing information for their 300 most common procedures as the government pushes to make healthcare prices more transparent.

However, researchers have accused hospitals and insurers of failing to fully comply with the regulations. 

Only 34.5% of 2,000 hospitals reviewed by nonprofit watchdog organization Patient Rights Advocate were deemed fully compliant with price transparency rules as of January. But, the CMS had only issued 14 civil monetary penalty notices to noncompliant hospitals as of February, according to the nonprofit.

The RAND study found inpatient prices for hospital services were 255% above what Medicare paid in 2022 while outpatient hospital service prices averaged 289%, according to the report, which was based on an analysis of 4,000 hospitals across 49 states. 

Prices for services at outpatient ambulatory surgical centers was slightly lower at 170% of Medicare payments.

There were also differences in pricing by geography. Arkansas, Iowa, Massachusetts, Michigan and Mississippi kept relative prices below 200% of Medicare prices during the study period. However, others had relative prices above 300% of Medicare. Hospitals in Florida and Georgia negotiated the highest relative rates.

Price transparency could be a tool for administrators of employer-sponsored plans to better negotiate employee benefits. Although employer-sponsored plans cover 160 million Americans, researchers said employers operate at a disadvantage when negotiating prices with providers and insurers due to a lack of detailed pricing information.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Brian Briscombe, lead researcher for the RAND hospital price transparency project, in a statement. “However, price transparency alone will not lead to changes if employers do not or cannot act upon price information.”

State and federal policymakers could rebalance negotiations by cracking down on noncompetitive healthcare markets, placing limits on payments for out-of-network hospital care or allowing employers to buy into Medicare or other public options, the report said.

The nation’s largest hospital lobby, the American Hospital Association, has rejected previous analyses of pricing data — including reports from Patient Rights Advocate.

On Monday, Molly Smith, AHA’s vice president for policy, pushed back against the RAND study, saying it was “suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients, as evidenced by issues like the recent concerning allegations against MultiPlan.”

Last week, Community Health Systems filed suit against MultiPlan alleging it had colluded with insurers to raise prices for patients and lower payments to providers. The lawsuit is the third against MultiPlan in under a year.