Hospital Prices Vary Widely, Often Higher With Insurance Than Cash, The New York Times Finds

October 12, 2021

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Source: Fierce Healthcare, by Anastassia Gliadkovskaya

Private insurers sometimes negotiate rates on hospital services that are higher than the cash price, a recent New York Times investigation found, and the same basic service can cost widely varying amounts even at the same hospital.

The Times surveyed 60 major hospitals that are complying with this year’s new Centers for Medicare & Medicaid Services (CMS) rule that requires hospitals to publish their negotiated, cash and chargemaster rates. Compliance has been spotty, and even with some published prices, the data has been difficult to draw meaning from.

Below is a graphic that, using data from the Times story published in August, shows the costs of a service at a hospital from each of the four regions of the U.S.

Fierce Healthcare reached out to all four hospitals included in our review of the Times’ data. In response, Erin Goff, Intermountain Medical Center’s media relations manager, noted a number of factors are considered when negotiating rates with payers that are “common across many industries.” These include “the number of patients the payer will direct to us, scope of facilities the payer includes in their network, and the payer’s demonstrated administrative efficiencies.”

In a statement, Beaumont Health presented similar influencing factors, adding that the severity of a visit also determines price. “Finally, it’s important to note that the published rates often do not reflect what is actually paid by the patient—negotiated rates include both the insurer’s payment to the provider plus patient’s payment,” the statement said.

Penn Medicine said in a statement it’s working to update price information on its sites to be compliant with the regulation and to be “as user-friendly as possible.” It suggested using its price estimator tool in the patient portal to estimate certain out-of-pocket costs. It noted that market position also contributes to the contracting process, and said “although we anticipate some continued variation in payment structures for the vast array of services we provide given the mix of commercial and governmental payors we contract with, we also hope that price transparency efforts will play a role in driving down overall variation across the healthcare industry.”

Wake Forest Baptist declined to comment for this story.

Given the price fluctuations, the Times argued that the data shed a light on how little power the consumer has to shop for insurance plans and for healthcare services.

But experts and hospital advocates caution that the data—payer-negotiated rates made public in the form of machine-readable files or hospital cost estimator tools—are not necessarily an accurate representation of the price a patient might pay.

“Numbers in the spreadsheets do not necessarily reflect the patient experience or their course of treatment,” said Ari Levin, senior associate director for policy at the American Hospitals Association. Since the final amount depends on several factors, including volume discounts, quality bonuses and whether multiple services are provided at once, “there is no way to capture all of those factors in a single ‘negotiated rate,’” Levin said.

Last year, the AHA along with other groups sued the U.S. Department of Health and Human Services (HHS) over the price transparency rule. They lost despite appealing the case.

America’s Health Insurance Plans published a statement saying the attempt to look at the data “spotlights a lot of numbers with little context” and “often compares apples and oranges.”

Because of these complexities, the CMS rule does not help patients “shop for services” as intended, said Delphine O’Rourke, a healthcare attorney and partner at Goodwin Procter. “I, as a consumer, don’t know at the end of the day what I’m going to be responsible for,” she said.

To O’Rourke, it’s not surprising that at times, a hospital’s cash price is lower for a service. Since people paying cash price are generally a small segment of patients, she explained, and tend to be uninsured or undocumented, hospitals structure cash pay anticipating that it will be “challenging to collect,” O’Rourke said. (Earlier this year, the Wall Street Journal found that many times, patients who pay with cash are actually charged the highest price across hospitals.)

Since healthcare is a market, those with hefty bargaining power—whether a hospital or a payer—can leverage better rates for themselves, O’Rourke said. That’s one reason driving provider consolidations, which can increase prices and premiums. “If you want to have a system where every MRI in the country is the same cost, that’s your national healthcare system,” she said.

Another possible reason some payer-negotiated rates are high is that they may be offsetting lower-priced services in a given contract, which can contain thousands of items, Levin added, making it difficult to draw conclusions about insurers and health plans based only on the cost of one service.

Cash pay can be complicated, too. Most hospitals don’t have a set self-pay rate—they negotiate one based on a patient’s financial circumstance, Levin noted.

The Times was not able to obtain some hospitals’ cash rates for this reason, the bottom of the story notes. When an insured patient pays cash, that payment does not count toward their deductible. “When you’re stepping outside of insurance, you’re removing the consumer protections that come with it,” Levin said.

Payers and hospitals can issue gag orders in their contracts, preventing them from disclosing their negotiated rates, even to public officials, the Times noted in its story. “Hospitals and plans negotiate prices for services and medical goods behind closed doors,” said Nisha Kurani, a senior policy analyst at Kaiser Family Foundation. “How price transparency will impact those negotiations remains to be seen.”

recent KFF poll found that most adults are not aware of the rule that requires hospitals to post their prices. The majority (85%) also reported not researching the price of a hospital treatment in the past six months.

“We have found that current implementation of the rule often makes it difficult to estimate the true cost of care,” Kurani said. In April, KFF tracked the negotiated rates for an MRI of the lower spine across 102 hospitals and found that “even when these prices were published, gaps or inconsistencies in data made it difficult to compare prices across hospitals,” according to Kurani.

Part of the rule requires hospitals to provide a patient cost estimator tool with prices for 300 common services; the AHA recommends patients use the tool as one way to get “the most accurate estimate” of their expected costs. But KFF found in its analysis that price estimates for the same service differed between the tool and the hospital’s machine-readable file.

Experts told Fierce Healthcare they would expect stronger compliance with the price transparency rule if providers were not in the middle of dealing with the COVID-19 pandemic. The AHA has urged for extensions to the rule, to allow providers more time to publish prices.

Donald Trump’s 2019 executive order, Levin said, led to the rushed price transparency policy that now burdens hospitals and does not serve patients. The No Surprises Act, which was passed in Congress and is meant to protect patients from surprise billing, has allowed for a more nuanced policy-making process that considers patients, she said. As before, the AHAalong with other groups, requested that HHS delay enforcement of some parts of the No Surprises Act.

 

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