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Insurers vs. Hospitals: Who Has the Upper Hand?

Jeff Elliott for HealthLeaders Media, December 8, 2010

The hospital and physician payment rate data he is referring to was provided by four major insurers—Aetna, Anthem Blue Cross Blue Shield, Cigna and UnitedHealth Group—in eight different markets. Researchers analyzed contracted payment rates for commercial insurance as a percentage of Medicare payments. The average inpatient hospital payment rates of four ranged from 147 percent of Medicare in Miami to 210 percent in San Francisco, according to the study.

"In extreme cases, some hospitals command almost five times what Medicare pays for inpatient services and more than seven times what Medicare pays for outpatient care," according to the Center, which noted that in the Los Angeles market, hospitals with prices at the 25th percentile received 84 percent of Medicare rates for inpatient care, while the hospital with prices at the 75th percentile received 184 percent of Medicare rates. One Los Angeles hospital with substantial inpatient claims volume even commanded rates at 418 percent of Medicare.

AHA claims that each insurer used its own methods to determine price comparisons and that no effort was made to verify, validate, or correlate the information provided, Umbdenstock said. He noted that using Medicare as a benchmark was inherently flawed given that it covers less than the cost of caring for a patient and that these costs are passed on.

It appears that the blame game for high healthcare costs is heating up just as healthcare reform is getting some traction.

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