Hospital Prices to Different Payer Types

By October 22, 2018 Commentary

Readers of this blog know that I am no fan of hospital pricing practices.  Medicare and Medicaid largely control the effects of excessive hospital market power by being able to dictate prices, within political limits.  Commercial health plans are at the mercy of market forces and the general lack of competition that exists in most populated markets today.  Recent studies have suggested that private health plans pay 50% or more than Medicare does for the same hospital services.  Some other payer types fare even worse, as reflected in a Health Affairs study.   (HA Article)   The researchers looked at the prices hospitals charged various payers in Florida over the period 2010 to 2016.  153 private, short-term, general acute hospitals were included in the study.  These hospitals must file detailed financial reports with the state.  The researchers divided payers into HMO, PPO, auto, workers compensation, travel insurers and liability insurance.  While private health insurance pays for most medical services, the other payer types are not insignificant and they often have substantial patient cost-sharing.  High hospital costs drive up premiums for these other insurance types affecting, for example, everyone who owns a car.

About 13-14% of hospital revenue was attributed to non-health insurance payers, like workers compensation and auto.  These payers are getting screwed but good by hospitals and it is getting worse.  Over the study period, for HMO/PPO payers the relative price they pay for a service compared to Medicare went from 1.9 times to 2.5 times in 2016; but for the other payers it increased from 2.8 times to 3.8 times.  44% of hospitals in the study were nominally not-for-profit and the rest were for-profit.  The ratio of Medicare payment was about the same for these two types of hospitals for HMO/PPO plans, but the for-profits charged other types of payers much more than did the non-profit facilities.  In fact, the median payment by another type of payer to a for-profit hospital was 5.1 times the Medicare rate by 2016.  Large systems like HCA own many of the for-profit hospitals in Florida and they apparently are hell-bent on raping and pillaging the other payer types.  And they generate a substantial portion of all their profits from these payers.  Just another example of why you can’t count on any self-restraint from hospitals.  Either break the market back up into smaller players or there needs to be some kind of all-payer payment regulation that prevents this absurd behavior that costs consumers a fortune; and provides an undeserved fortune to hospitals.

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