Negotiated inpatient and outpatient commercial rates vary significantly across geography, payers, care settings and facilities, a new report from Trilliant Health found.
“Longstanding provisions of federal antitrust law have made it difficult, if not impossible, for employers to provide high-value coverage to employees,” said Allison Oakes, Ph.D., chief research officer for the health care analytics company. “This information asymmetry has also stifled meaningful competition between providers and insurers. In economic terms, a market with proprietary prices is doomed to fail.”
The report reviewed health plan transparency files from more than 3,000 hospitals and a similar number of ambulatory surgery centers to reveal stark variations in negotiated rates. It found both widely variable pricing and a lack of correlation between cost and quality of care:
- Commercially insured patients across the country pay widely varying amounts for the same procedure, the costs of which primarily are underwritten by employers. Across six inpatient procedures, negotiated rates varied by an average ratio of 9.1 across the country.
- Different payers negotiate significantly different amounts for the same procedure at the same hospital. For example, the average difference in price between the Aetna and UHC negotiated rate was equivalent to 30% of the national median price.
- Within a sample of 10 hospitals that have been featured on various best hospital lists, there was no correlation between aggregate measures of cost and quality.
- Across the six outpatient surgeries examined, the national median ambulatory surgical center rate was always lower than the median rate for hospital outpatient departments.
Variation from hospital to hospital and from surgery center to surgery center highlights the need for facility-level data to drive informed health care purchasing decisions, whether by an employer or individual.
“The report reveals a startling spread in prices that begs for explanation, not rationalization or justification,” Oakes said. “Employers finally have the information they need to understand the value of the health care services they purchase and that their employees receive, while hospitals and payers can be held accountable for value for money.”
The results of the report can help stakeholders make data-driven decisions. Self-funded employers can use this information to meet ERISA fiduciary duties and assess whether the prices they pay are reasonable, enabling them to be better-informed purchasers of health benefits. Health systems gain real-time insight into negotiated inpatient and outpatient rates, helping managed-care teams’ benchmark value and compete on cost and quality.
Policymakers often rely on estimates of what Medicare would have paid to infer relative prices.
“It is axiomatic that bad facts — or no facts — make bad policy,” said Hal Andrews, president and CEO of Trilliant Health. “And bad health care policy impacts every American. At some point, federal and state policymakers must make data-driven and difficult decisions about the limits of government-funded health care.”
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