Category Archives: Rand Corporation

Hospital Price Transparency: Is the Juice worth the Squeeze?

Posted on by • Posted in American Hospital Association (AHA), Health System, Hospital, Hospital Industry, Price Transparency, Rand Corporation • Leave a comment
Hospital Price Transparency: Is the Juice worth the Squeeze?

Last week, RAND issued its latest assessment of hospital prices concluding…

“In 2022, across all hospital inpatient and outpatient services (including both facility and related professional claims), employers and private insurers paid, on average, 254% of what Medicare would have paid for the same services at the same facilities. State-level median prices have remained stable across the past three study rounds: 254 %of Medicare prices in 2018 (Round 3), 246%in 2020 (Round 4), and 253% in 2022 (Round 5—the current study).”

Like clockwork, the American Hospital Association issued its “Rebuke” of the report:

“In what is becoming an all too familiar pattern, the RAND Corporation’s latest hospital price report oversells and underwhelms. Their analysis — which despite much heralded data expansions — still represents less than 2% of overall hospital spending. This offers a skewed and incomplete picture of hospital spending. In benchmarking against woefully inadequate Medicare payments, RAND makes an apples-to-oranges comparison that presents an inflated impression of what hospitals are actually getting paid for delivering care while facing continued financial and other operational challenges. 

In addition to the ongoing flaw of relying on a self-selected sample of data, their analysis is suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients….”

It’s the 5th Edition of RAND’s Employer Transparency Report, each featuring slight methodology changes using Sage Transparency Commercial Claims Data developed for the Employer Forum of Indiana.

The debate over hospital prices is not new nor is RAND the only investigator. Since the Trump administration enacted its Executive Order 13877 (Improving Price and Quality Transparency in American Healthcare) June 24, 2019, numerous organizations have introduced price transparency tools to enable hospital price shopping i.e. Turquoise, Milliman, Leapfrog et al. The Biden administration continued the rule increasing its penalties for non-compliance and Congress has passed 3 laws with bipartisan support widening its application.

However, best-case results reflected as articulated by Larry Levitt, senior vice president of the Kaiser Family Foundation, have not been realized:

“App developers will go crazy developing shopping tools for patients, and patients will use those tools to search for the best deals. The public availability of prices will shame high-priced hospitals into lowering their prices because they’ll be so embarrassed.”

My take:

Academic researchers and economists have concluded that hospital price transparency has not led to reduced heath spending overall nor lower hospital prices. Per a recent systematic review: “No evidence was found for impact on the outcomes volume, availability or affordability. The overall lack of evidence on policies promoting price transparency is a clear call for further research…  Price-aware patients chose less costly services that led to out-of-pocket cost savings and savings for health insurers; however, these savings did not translate into reductions in aggregate healthcare spending.  Disclosure of list prices had no effect, however disclosure of negotiated prices prompted supply-side competition which led to decreases in prices for shoppable services.”

Per Wall Street Journal actuaries, hospital price increases account for 23% of annual health spending increases but vary widely based on factors other than their underlying costs. Determining how hospital prices are set remains beyond the scope of conventional pricing models.

Nonetheless, hospital price transparency is here to stay: public attention is likely to grow and sources– both accurate and misleading– will multiply. It’s safe for elected officials because it’s popular with voters. Per Patient Rights Advocate survey (December 2023), 93% of adults think hospitals should be required to post all prices ahead of scheduled services. It’s clearly seen as foundational to the Federal Trade Commission doctrines of consumer protection and competition. And it’s important to privately insured consumers—the majority of Americans– since 73% of their claims are for “shoppable services” though they trust payers more than hospitals for estimates of their out-of-pocket obligations in these transactions (61% vs. 22%).

In July 2018, I wrote:” Arguing price transparency in healthcare is a misguided effort is like arguing against clean air and healthy eating: it’s senseless.” It’s still true. Making the case that price transparency has a long way to go based on current offerings and utilization is legitimate.

The price transparency movement is gaining momentum in healthcare: though it still lacks widespread impact on spending today, it soon will.”

Hospitals are 30% of total U.S. health spending and almost 40% of the population uses at least one hospital service every year. Promoting “whole person care,” while touting quality war while disregarding affordability and price transparency for consumers seems inconsistent.  Enabling consumers to easily access accurate prices—not just out-of-pocket estimates– is imperative for hospitals seeking long-term relevance and sustainability. And state and federal lawmakers, along with employers, should structure benefits that reward consumers directly for shopping discipline instead of allowing insurers to benefit alone.

Is the Juice worth the Squeeze for hospital price transparency efforts? To date, proponents say yes, opponents say no, and each side has valid concern about use by consumers. But unless one believes the role of consumers as purchasers and users of the system’s service will diminish in coming years, the safe bet is hospital price transparency will play a bigger role.

Hospitals charged employers and insurers 254% more than Medicare in 2022: study

Posted on by • Posted in American Hospital Association (AHA), Health System, High Prices, Hospital, Hospital Industry, Medicare Reimbursement, Price Transparency, Rand Corporation • Leave a comment
https://www.healthcaredive.com/news/hospitals-charge-employers-insurers-more-Medicare-Rand/715943/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-05-15%20Healthcare%20Dive%20%5Bissue:62072%5D&utm_term=Healthcare%20Dive

Hospitals with larger market shares were among the worst offenders, the Rand Corporation found.

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.