Hospitals with bargaining muscle in New York are getting paid 1.5 to 2.7 times as much for care by insurers as the lowest-priced hospitals in the same market, a new study shows.
The prices did not equate to better or lesser quality, according to an analysis by Gorman Actuarial of nonpublic data for 107 hospitals and nine insurers in three regions: Buffalo, Albany and downstate, including New York City.
The report, titled Why Are Hospital Prices Different? An Examination of New York Hospital Reimbursement, was funded in part by the New York State Health Foundation.
“This landmark report helps explain what is happening at the negotiating table between hospitals and insurance plans, and how it results in such wide price variation,” said David Sandman, CEO of NYSHealth.
The report identifies contract provisions between hospitals and insurers that can inhibit price transparency to the detriment of consumers who are paying more out-of-pocket for healthcare as high-deductible plans grow in popularity in the individual and employer markets.
Some contract provisions prohibit the inclusion of hospital prices in cost-estimator tools available to consumers, the report noted. And anti-steering language may limit what insurers can tell patients “about high-quality, lower-priced providers,” it noted.
Those elements can help hospitals maintain price advantages and crimp competition, the report said.
Generally speaking, hospitals that are part of a hospital system with a large market share tend to be higher-priced as a result of the power of that hospital system in contract negotiations, regardless of the individual hospital's size or market share, the report noted.
The report also does some myth-busting. One of the standard rationales used by hospitals to justify high commercial prices is that they are needed to offset high volumes of Medicare and Medicaid patients, which tend to get lower reimbursement.
The study showed no correlations on that front. It found that hospitals in New York City and downstate that serve more Medicare and Medicaid patients tend to fetch lower prices in the private commercial market.
Meanwhile, high Medicare and Medicaid volumes in Buffalo and Albany showed no correlation with the prices received from commercial carriers. Hospitals with higher prices did not necessarily have higher quality. Likewise, hospitals with lower prices did not necessarily have lower quality.
Bela Gorman, the lead consultant at Gorman Actuarial, said price variation was greatest downstate, but even Albany had its share of high-priced hospitals.
“In Albany, rural hospitals—which have less competition—are generally higher-priced,” Gorman said.
NYSHealth is a private foundation focused on building healthy communities and empowering consumers through grants, technical assistance and policy research.