A new analysis of price transparency data reveals massive and often irrational variations in payer rates, arming providers with powerful new leverage for contract negotiations.
Newly available health plan price transparency data reveals a "startling spread," according to a Trilliant Health analysis. The review of Aetna and UnitedHealthcare rates, using federal Transparency in Coverage (TiC) files, shows significant price variation across geographic locations, care settings, and even within the same hospital.
The report focuses on absolute dollar differences in negotiated rates, rather than relative prices, and highlights opportunities for health systems to push back against unfavorable terms.
Revenue cycle impact
Negotiated rates for the same inpatient procedure varied by an average ratio of 9-to-1 across the country. For instance, for a coronary bypass without major complications (MS-DRG 236), the median negotiated rate was $68,194, but actual rates ranged from as low as $27,683 to as high as $247,902.
This level of variation occurs within individual states and even within facilities. In Pennsylvania, for example, the UnitedHealthcare negotiated rate for a major bowel procedure (MS-DRG 330) ranged from $18,066 to $87,457—an absolute price difference of more than $69,000 for the same payer in the same state.
Across six common inpatient procedures, the average absolute difference between the Aetna and UHC negotiated rate at the same hospital was $15,366. At Tufts Medical Center, for example, the Aetna rate for a coronary bypass with major complications (MS-DRG 235) is $95,989, while the UHC rate is more than 50% higher at $144,204.
Perhaps most critically for providers preparing for a value-based future, the report found "no observable correlation between aggregate measures of cost and quality" among a sample of 10 top-ranked hospitals. This data directly refutes the long-held payer argument that higher-priced hospitals necessarily deliver better care, providing revenue cycle leaders with a strong argument in contract negotiations.
Ambulatory setting opportunity
The report also confirms that a massive price differential exists between hospital outpatient departments (HOPDs) and ambulatory surgery centers (ASCs) for common procedures.
Across five outpatient surgeries analyzed, the national median surgery center rate was always lower than the median rate for HOPDs. A colonoscopy (CPT 45378), for instance, costs an average of $2,454 less when performed in an ASC, a 67.5% savings. With nearly two million of these procedures performed for commercially insured patients annually, the potential savings for employers and patients, and the potential loss of volume for hospitals, exceeds $4.5 billion for that procedure alone.
This price disparity represents both a threat and an opportunity for health system revenue cycle leaders. The threat is that payers and employers, who now have this information available, may increasingly steer patients to lower-cost ASCs. However, there is also an opportunity for health systems to develop more informed ambulatory strategies, ensuring their own ASCs are priced competitively and using the data to justify HOPD rates where appropriate.
Ultimately, the Trilliant Health report offers an early glance into an era without proprietary pricing data. For revenue cycle leaders, the TiC data is the "new gold standard for price transparency," providing an unprecedented opportunity to challenge payers, defend pricing strategies, and make more evidence-based decisions.
Luke Gale is the revenue cycle editor for HealthLeaders.
KEY TAKEAWAYS
An analysis of Transparency in Coverage data reveals that negotiated rates for the same inpatient procedure can vary by an average ratio of 9-to-1 across the country.
The report found an average difference of $15,366 between Aetna and UHC's negotiated rates for common inpatient procedures at the same hospital.
A significant price gap exists between care settings, with a colonoscopy costing an average of $2,454 less at an ambulatory surgery center than in a hospital outpatient department.