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Payer-Negotiated Prices at Hospitals Higher for Insured Patients for Same Services

Analysis  |  By Jay Asser  
   December 02, 2022

A study finds variation between rates for insured and uninsured at the same hospital and differences in cash prices across hospitals.

Insured patients have an expectation that their health plan allows them to pay less for hospital services, but that may not necessarily be the case.

According to a study by a Trinity College economist, payer-negotiated rates for insured patients are often higher than self-pay cash prices for the same services.

Ruiz Sánchez examined data on 14 shoppable hospital services that can be scheduled by patients in advance, including office visits, MRIs, and CT scans. Hospitals have had to disclose prices under the price transparency law, which went into effect on January 1, 2021. Data made available through the federal rule was compiled within the Turquoise Health dataset, consisting of records on about 2,200 hospitals.

The research was focused on the payer-specific negotiated rates charged to major insurers Aetna, Blue Cross Blue Shield, Cigna, Humana, and United Health, as well as government-related payer plans like Medicaid, Medicare, Tricare, Veterans Affairs and state agencies insuring state employees.

The findings revealed that 60% of negotiated rates were higher than the cash prices for the same services.

Additionally, there was also significant variation between cash prices across hospitals, with costs for the same service being as much as eight times more expensive depending on the hospital.

"Individuals purchasing private health insurance are paying monthly premiums … under the promise that their insurer is also negotiating the lowest possible rates for services," Sánchez said.

"This raises the question whether it is evidence of poor bargaining by insurers, who are representing consumers, in their negotiations with hospitals."

A recent study also found that some insurers negotiate prices for common radiology services less efficiently than their competitors, as well as across other health plans under their management.

The research, published in Radiology, found that on average, the maximum negotiated price for shoppable radiology services was 3.8 times the minimum negotiated price in the same hospital and 1.2 times in the same hospital-insurer pair.

Another study published in The American Journal of Manage Care found that payers generally negotiate lower amounts for health insurance exchange plans than their commercial group rates and significantly more than their Medicare Advantage contracts at the same hospital.

Jay Asser is an associate editor for HealthLeaders.


KEY TAKEAWAYS

A Trinity College economist used price transparency data to uncover that payer-negotiated rates for insured patients are often higher for the same services.

One in six (60%) negotiated rates in the research were higher than the cash prices for the same service.

Cash prices were as much as eight times more expensive from one hospital to another.


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