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Healthcare Price Variation a Challenge for State, Local Leaders

Healthcare prices for inpatient, outpatient, and physician services varied widely by region and local markets, suggesting local stakeholders should tackle the challenge.

A new study found healthcare price variation by state and local markets

Source: Thinkstock

By Jacqueline LaPointe

- Local leaders may be better positioned to solve healthcare cost challenges than the federal government since healthcare price variation was more significant by state and local markets, a new Health Care Cost Institute (HCCI) and Robert Wood Johnson Foundation report indicated.

Researchers analyzed employer-sponsored insurance data from 2012 and 2014 in 61 Core-Based Statistical Areas (CBSAs). The data revealed that healthcare prices for inpatient, outpatient, and physician services substantially differed by region.

For example, healthcare consumers in El Paso, Texas (the most expensive CBSA) paid 29 percent more than the national average for inpatient services in 2014. On the other hand, patients in Knoxville, Tennessee (the cheapest CBSA) paid 37.5 percent less than the national average for the same services in 2014.

Healthcare prices at the local market level also differed by outpatient and physician services for the same period. Researchers reported the following market differences:

• Outpatient healthcare prices in the CBSA with the lowest outpatient price index (Baltimore-Columbia-Towson, Maryland) had prices 36 percent less than the national average during the period

• The CBSA with the highest outpatient price index (Trenton, New Jersey) had healthcare prices 55 percent higher than the 2014 national average

• Healthcare prices for physician services in the CBSA with the lowest index value (Louisville-Jefferson County, Kentucky) were 17 percent less than the national average for all three years

• Physician prices in the CBSA with the greatest average index value (Sheboyhan, Wisconsin) were 64 percent higher than the national average in 2014

“Our hope is that this information will help local stakeholders better understand the markets they operate in and use it to design policies that deliver higher-value care,” stated Katherine Hempstead, Robert Wood Johnson Foundation’s Director of Health Insurance Coverage.

Despite wide geographic variations for all three medical categories, researchers found some healthcare price consistencies within states. CBSAs in the same state with historically low healthcare prices tended to maintain cheaper prices during the study period and vice versa.

For instance, Lexington and Louisville in Kentucky had average inpatient healthcare prices that were at least 20 percent lower than the 2013 national average for the three years analyzed.

In contrast, some CBSAs in Connecticut maintained higher healthcare prices for inpatient services. Four of the regions had average price indices between 7 and 19 percent greater than the national average during the study’s timeframe.

Similar trends emerged during the study timeframe for outpatient and physician services costs.

However, researchers noted that some states faced substantial healthcare price variations across the regions analyzed. Florida was particularly affected by local healthcare market differences. Outpatient prices were on average 17 percent lower than the national average in Jacksonville. But 12 percent more expensive on average in Miami.

Wisconsin also reported the widest range for physician service costs across their CBSAs. The average physician price indices were between 42 and 64 percent more than the national average across five regions.

Additionally, researchers uncovered national trends for healthcare prices. The study showed that inpatient costs most consistently increased during the period, whereas outpatient prices saw the greatest boost and physician services experienced the least growth.

The three medical categories experienced the following healthcare price increases between 2012 and 2014:

• Inpatient prices increased by 5.4 percent from 2012 to 2013 and grew by 5.6 percent by 2014

• Outpatient prices saw the largest growth, rising by 8.9 percent from 2012 to 2013 and another 6 percent in 2014

• Physician prices did not significantly change from 2012 to 2013, but increased by 3.3 percent in 2014

Researchers intend for the study’s results to influence local healthcare stakeholders to analyze what drives healthcare price variations and higher costs.

“Using this information, local policymakers, employers, and providers can identify trends in prices that are potentially contributing to the largest growth in overall healthcare spending,” stated Eric Barrette, HCCI’s Director of Research. “This insight can inform efforts to develop meaningful policy aimed at reducing overall healthcare spending while maintaining, and even improving, quality.”

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