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Patient Costs, Payer Responsibility Not Linked to Hospital Prices

A patient’s out-of-pocket costs and insurance contribution had no correlation to hospital prices in Massachusetts, a new study found.

Hospital prices and patient costs

Source: Getty Images

By Jacqueline LaPointe

- A new analysis by the independent research organization Pioneer Institute reveals that not only do hospital prices significantly vary by organization, but how much consumers and insurers pay for care also substantially differs by hospital.

The analysis of 14 representative Massachusetts hospitals showed little connection between a patient’s out-of-pocket costs and the amount insurers paid compared to the overall hospital price of a procedure, which in this case was an MRI.

For example, the average patient at New England Baptist Hospital paid about 30 percent of the total price of an MRI, while a patient at Tufts Medical Center or Mount Auburn Hospital was on the line for less than 10 percent of the total cost for the same procedure.

Researchers also pointed out that patients at the three hospitals with the highest total prices for MRIs paid 20 percent of less of their overall bill, which was the average across all hospitals included in the analysis.

“Even if patients don’t see differences in out-of-pocket prices among hospitals, higher utilization of more expensive providers drives up the cost of care, which puts upward pressure on insurance premiums,” stated Barbara Anthony, co-author of the report titled, “Wildly Varying MRI Prices at Massachusetts Hospitals: Why We Need Access to Healthcare Prices at All Levels.”

READ MORE: 4 Strategies for Providers to Improve Hospital Price Transparency

Anthony is also a Senior Fellow in healthcare at the Pioneer Institute. She co-wrote the report with Scott Haller and Kaila Webb of the Pioneer Institute.

Their research into hospital price variation in Massachusetts is one of many analyses coming out revealing significant differences in price among hospitals across the country.

Minnesota Department of Health reported in August 2018 that hospital prices varied by facility and also within a single facility. A patient undergoing one of four hospital procedures may pay two to seven times more as another patient at the same hospital.

Hospital prices for a brain MRI scan in California also varied, ranging from $3,200 to $8,800, according to a recent California Healthline report.

Healthcare stakeholders acknowledge that healthcare price variation in general is happening, and the variations may result in higher healthcare costs. If patients cannot access the prices at local hospitals, they are unlikely to make cost-conscious decisions.

READ MORE: Location, Market Competition Influence Hospital Price Variation

Federal and state leaders have been pushing for increased healthcare price transparency. Notably, CMS recently started to require hospitals to post their chargemasters online so patients can access prices and compare costs in their community.

Hospitals and health systems have also started to complement chargemaster transparency with out-of-pocket cost estimates for patients. Websites, patient portals, mobile apps, and other tools are now available to some patients to get a personalized cost estimate based on their scheduled procedure and insurance information.

But researchers from the Pioneer Institute are saying that consumers may need more than just chargemaster and out-of-pocket cost information to truly shop for low-cost care. Since the consumer share of healthcare financial responsibility differs so drastically by hospital, individuals need to know how much their insurance contributes to the overall cost of the procedure.

“While patients might not see a difference between many of these hospitals, higher utilization at a high-cost provider drives up the total cost of healthcare, which in turn can affect premiums,” Anthony et al. wrote. “So even if the out-of-pocket amount is the same at two hospitals, there will be long-term financial consequences for choosing the costlier provider.”

Researchers found that if all 3,107 people from the analysis who received an MRI in relatively expensive Suffolk Country had the scan performed in nearby Middlesex County instead in May 2015, the insurers would have saved over $269,159. Insurers could have then passed those savings onto consumers through lower premiums.

READ MORE: WA Makes Healthcare Price Transparency Consumer-Friendly

“Even a small difference in price, in this case the $87 between the average insurance price for each county, can scale up quickly,” the analysis stated.

The industry can achieve these long-term savings by giving the public access to all-payer claims databases (APCDs). The databases are state-run repositories of medical, pharmacy, and dental claims from public and participating private payers.

Thirty states maintain, are developing, or have a strong interest in developing an ACPD, according to the Agency for Healthcare Research and Quality (AHRQ). Eighteen states also have legislation mandating the establishment and use of APCDs or policymakers are actively developing the databases.

Primarily researchers and companies who can pay have access to ACPDs right now. But researchers from the Pioneer Institute argued that making the databases public with the appropriate security restrictions in place will help to promote healthcare price transparency that leads to long-term savings.

Researchers also called for insurers to create incentives for beneficiaries to choose low-cost providers.

“Transparency is a crucial part of cost containment, but only if the structures and incentives are in place so that patients, when appropriate, can shop for value,” they advised. “To make that possible, policymakers must couple transparency with financial incentives to move consumers to lower-cost/high-quality providers even when out-of-pocket costs are similar.”


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