Some Health Insurers Overpaying for Common Radiology Services

New research finds payers negotiate different prices for services like CT and MRI scans within the same hospital.

Health insurers are not only negotiating prices for common radiology services less efficiently than their competitors, but across other health plans under their management as well, according to a study on pricing variation.

Published in Radiology, a journal of the Radiological Society of North America, the research examined commercial negotiated prices across hospitals for shoppable radiology services such as CT or MRI scans.

The authors 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.

"Many commercial plans are leaving money on the table when negotiating price with hospitals, especially for expensive CT and MRI scans," said study co-author Ge Bai, Ph.D., C.P.A., professor of accounting at the Johns Hopkins Carey Business School. "High prices paid by commercial plans eventually come back to bite U.S. employers and workers through high premiums and out-of-pocket costs."

CT and MRI services had the most price variation within a hospital and within a hospital-insurer pair, as well as higher prices relative to Medicare when compared to other radiology services. Brain CT had the most variation, with 25% of hospital-insurer pairs having their maximum negotiated price more than 2.4 times their minimum negotiated price.

Additionally, the study found that higher prices for higher cost services imply higher hospital profitability, which can influence hospitals to opt for high-cost imaging and lead to inefficient spending for payers and patients.

In theory, the hospital price transparency rule should discourage that behavior by hospitals and give payers and patients more information. Hospitals have been slow to adhere to the law, however, as an August report by PatientsRightsAdvocate.org found that only 16% of hospitals were complying with the rule nearly 20 months after it went into effect.

A recent report by Turquoise Health suggests facilities may finally catching up though, with the research revealing that 65% of hospitals have published robust negotiated rates.

"Price transparency took the blindfold off the eyes of commercial payers, forcing them to recognize the fact that they are often paying too much," Dr. Bai said. "Equipped with pricing information, radiologists can change the landscape of care delivery to benefit patients and payers."