Navigate the healthcare industry
Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.
The prices hospitals charge for their services have long been opaque, but thanks to a 2021 hospital price transparency law, the picture is starting to come slightly into focus. And it turns out, there are some huge disparities in the prices hospitals charge that can’t be attributed to quality of care, according to a recent study from research institute Rand Corporation.
Using star ratings from the Centers for Medicare and Medicaid Services (CMS)—a standard industry measure of hospital quality—Rand researchers found that hospitals charge prices that vary widely, ranging from close to Medicare rates to over 400% of Medicare rates.
“The wide variation in prices is notable, and addressing this variation could lead to substantial reductions in medical spending,” researchers wrote in the study.
The researchers based the study on medical claims data from 2020 to 2022 from “a large population of privately insured individuals, including hospitals and other facilities from across the United States.” While they acknowledged that CMS star ratings aren’t necessarily reflective of the full value of a hospital’s services, the researchers found that Arkansas, Iowa, Massachusetts, Michigan, and Mississippi all had commercial prices averaging below 200% of Medicare prices. California, Florida, Georgia, New York, South Carolina, West Virginia, and Wisconsin all had commercial prices that averaged above 300% of Medicare prices.
A significant chunk of the price variation (18%) can be attributed to a hospital’s market share, according to the study. That means the more patient discharges a hospital has, the higher its prices tend to be, Brian Briscombe, a healthcare cost analyst at Rand and leader of the study, told Healthcare Brew.
The American Hospital Association trade group pushed back against the Rand study, in a statement saying the analysis “represents less than 2% of overall hospital spending” and “offers a skewed and incomplete picture of hospital spending.”
“In benchmarking against woefully inadequate Medicare payments, Rand makes an apples-to-oranges comparison that presents an inflated impression of what hospitals are actually getting paid for delivering care while facing continued financial and other operational challenges,” according to the statement.
Briscombe said the data used for the study represents more than 6% of all commercial claims in the US, which is “more than enough of a sample to make reasonable estimates.”