It’s no secret that health care prices nationwide vary widely from one market to the next, and even within individual markets. A panel on hospital mergers during AHCJ’s Health Journalism 2016 conference in Cleveland will examine the many factors driving these variations in hospital prices. We’ll also discuss how consumers can shop more effectively for the lowest-priced care.
The session, “Merger mania of health providers and the rise of dominant and potential monopolies,” will be 4:40-6 p.m. on Saturday, April 9.
Zack Cooper, Ph.D., an assistant professor of health policy and of economics at Yale University, will talk about the research that he and his colleagues published last year on hospital consolidations. We’ll also hear from Karim A. Botros, chief strategy officer for MetroHealth, a public hospital in Cleveland, and Kevin Sears, executive director of market and network services for the Cleveland Clinic.
In their research, Cooper and colleagues at the Health Care Pricing Project discovered a wide variation in hospital prices, not only for inpatients in general but also for seven procedures done frequently in hospitals: hip replacements, knee replacements, cesarean sections, vaginal deliveries, percutaneous transluminal coronary angioplasties (PTCAs), diagnostic colonoscopies, and MRIs of lower-limb joints without contrast.
For an MRI of a lower-limb, for example, prices may vary by a factor of 12 nationwide, the study said. That means that what the most expensive hospital in the nation charges for a lower-limb MRI is 12 times higher than what the least expensive hospital charges for the same services. The problem with comparing hospitals prices in referral regions is that consumers cannot shop effectively among different hospital referral regions (HRRs).
But they certainly can shop successfully within an HRR, Cooper says. Within HRRs, the most expensive hospitals has negotiated prices for lower-limb MRIs that are twice as high as those of the least expensive hospitals, the research shows.
“For consumers, we show that the price of an MRI can vary by a factor of 10 within a large HRR,” Cooper says. “That means the potential for savings for individuals is enormous. If consumers are willing to travel a little – and not even a lot – further, they can save tremendous amounts of money.”
He concedes that there are many reasons consumers do not shop for care, as other studies have shown. Research by the Health Care Cost Institute, for example, indicates that the amount of money consumers spend out of pocket on any health care service depends on several factors, including the design of their health insurance benefits, according to an article about HCCI’s research by Jeff Lagasse in Healthcare Finance News.
The research by HCCI Executive Director David Newman and researcher Amanda Frost on what consumers spend out of pocket on so-called “shoppable” services comes from cost and usage data provided by 92 billion health insurance claims from Aetna, Humana and UnitedHealthcare. (By the way, that’s the same data used in Cooper’s HCPP research.)
In a recent report, Newman and Frost show that in 2011, only about 7 percent of total health care spending ($27.7 billion) was spent on services that consumers paid for out of pocket and were shoppable.
Frost, who authored the report on price transparency, said, “There is not that much savings to be gained from consumer shopping for many non-emergency services.”
Does Newman and Frost’s work conflict with that of Cooper and colleagues? In an interview, Newman and Frost explained that Cooper is correct that consumers have the potential to save significant sums from shopping for services, but often either will not or cannot shop because hospitals prices typically are not made public, or because their benefit plan’s networks limit them to certain hospitals. If the consumer finds a lower priced service at an out-of-network hospital, he or she may be penalized for going out of network or have to pay for the entire cost of care out of pocket. In that case, their health plan offers no benefit.
For health care journalists, here is a story worth pursuing: why can’t consumers get better information on the costs of hospital care? How much do narrow networks interfere with a patient’s ability to seek lower-cost providers?