Market research firm Trilliant Health released research Monday revealing striking differences in the prices providers charge for identical services. The report, which examined data from 2,659 hospitals and 3,491 ambulatory surgery centers, found that commercially insured patients pay widely varying amounts for the same services — and these costs are primarily absorbed by employers.
For instance, it showed that the median rate for a coronary bypass without cardiac catheterization or major complications is $68,194, but negotiated rates ranged from $27,683 to $247,902 — a difference of more than $220,000.
Oftentimes, huge price differences are present even for the same procedure at the same hospital. Take for example a coronary bypass without cardiac catheterization with major complications at Tufts Medical Center in Boston. The Aetna negotiated rate is $95,989, while UnitedHealthcare’s rate is $144,204.
Trilliant Health Chief Research Officer Allison Oakes called it “surprising and problematic” that there is a price difference of nearly $50,000 for the exact same procedure at the exact same facility.
“The amount that the procedure will cost depends on who is paying. No other industry works that way. For too long, healthcare has been an exception to the rule and that needs to end,” she said.
The report also noted that among a sample of 10 hospitals that often appear on “best hospital” rankings, researchers found no clear link between how much care costs and the quality of that care.
This is another disappointing divergence in healthcare compared to other sectors, Oakes pointed out. In most industries, people expect things to operate on a “you get what you pay for” model, meaning spending more equals a higher quality product or service.
“Because prices have been proprietary for so long, providers and insurance companies have not had to compete on price. And as a result, price is not a reliable signal of quality. Every healthcare stakeholder needs to reevaluate their pricing to make sure that they are providing value to patients. If you are providing average quality at an above average price, you are going to need to change your strategy,” Oakes remarked.
She encouraged providers to “take a hard look in the mirror” and assess the extent to which they are delivering high-value services to their patients. In her view, the only way providers can continue to win commercially insured patients is by demonstrating clear value for the cost.
Oakes noted that providers can do this in one of three ways: better than average quality at the market price, better than average quality below the market price, or average quality below the market price.
As more and more price transparency data becomes available, the public is gaining potential to know the exact rates for every provider across the country, she added.
However, experts agree that for the most part, price transparency regulations — while well-intentioned — have done little to actually help the average American shop for care. To date, most of the new rules around price transparency have put the onus on patients, expecting them to seek out pricing information and spend time analyzing confusing spreadsheets, Oakes said.
“This data demonstrates that commercial negotiated rates are fundamentally flawed. Realistically, we shouldn’t expect a handful of patients to ‘shop’ our way out of this problem. A problem of this scale requires larger scale, top-down solutions,” she explained.
In some ways, the current extent of the problem is not all that surprising, given, as Oakes sees it, “a market with proprietary pricing is doomed to fail.” But now that this cost data is becoming unsheathed, providers and payers need to start competing on price, she stated.
The availability of pricing data also implicates the fiduciary duty of employers to purchase health benefits that are in the best interest of their employees, Oakes pointed out.
“Knowing that this amount of variation and wasteful spending exists, employers need to start asking the hard questions and demand that benefit brokers and health plans provide them with the data they need to select high-value plans for their employees,” she declared.
She noted that employers are a hugely important stakeholder when it comes to the nation’s healthcare system, with them being responsible for about 30% of the country’s total health expenditures.
Oakes hopes this data is a call to action for employers, saying they need to realize how much leverage they have and start demanding answers.
Photo: Adrienne Bresnahan, Getty Images
