Hoosier Employers Pay 304% More - Examining Hospital Pricing

Every now and then, new data comes along that makes the reader pause and say, “Wow, that’s a big number.” Just last fall, that very thing happened when the RAND Corporation and the Employers’ Forum of Indiana announced the results of a massive hospital pricing study which found that employers and private insurers paid Indiana hospitals 304% of what Medicare would have paid for the same hospital services.

The RAND 3.0 study, which can be downloaded from the organization’s website, analyzed data from 49 states in what the authors described as “the most comprehensive study of hospital prices ever done to be made publicly available.”

Researchers analyzed hospital claims data representing $33.8 billion from 2016-2018 for 3,112 hospitals located in every state except Maryland. They collected data from self-insured employers, six state all-payer claims databases, and health plans across the country.

Using all that data, the researchers were also able to construct a free resource that will enable employers to browse and compare healthcare systems based on quality and prices. This may help some find ways to save.

Specifics on Indiana’s Numbers

Indiana’s numbers reflected specific challenges that Hoosier employers and private insurers are facing when compared against figures from other states. Namely, that we’re paying a lot more than our contemporaries for similar services.

For Indiana, the report said that:

• In 2018, private insurers, on behalf of employers and employees, paid Indiana hospitals 304% of what Medicare would have paid for the same hospital services, making Indiana the state with the sixth highest prices in the nation for total hospital prices. Total hospital price includes hospital facility fees and professional fees.
• In 2018, Indiana had the fourth highest facility prices in the nation at 340% of Medicare.
• In 2018, Indiana had the fourth lowest professional fees in the nation at 130% of Medicare.
• The study findings note wide variability of prices across health-systems ranging from 168% to 387% of Medicare in 2018 (health care systems in Indiana was defined as organizations with two or more hospitals).
• Looking at just inpatient prices (facility fees plus professional practitioner fees), prices ranged from 134% to 328% of Medicare in 2018.
• When comparing just outpatient prices (facility fees plus professional practitioner fees), prices ranged 186% to 442% of Medicare in 2018.
• Hospital quality and safety information is also widely variable and does not correlate with price.
• Indiana has high quality and lower price hospital options available, as well as low quality and high price hospital care.

A Useful Tool for Employers

Researchers also created a handy tool for employers. All of the findings from the report have been aggregated in an online format, including an Excel spreadsheet and interactive map noting all hospitals’ price and quality information, at www.employerPTP.org. This enables employers to shop around, so to speak, and compare quality ratings and cost figures fairly easily. The top 10 most expensive health systems in each state are identified with descriptions of individual hospital prices alongside quality and safety measures.

Gloria Sachdev, president and CEO of the Employers' Forum of Indiana, commented, “Year after year, high hospital prices have taken a financial toll on employers and everyday people. And for employers specifically, it has resulted in them having less money available for employee raises, hiring staff, offering robust health benefits, growing their businesses, and contributing to their communities. The RAND 3.0 study findings allow us to be more informed shoppers of health care.”

“The Rand study has proven to be an important tool to help employers design plans to deliver the best and most cost-effective health care to their employees,” says Natalie Roberts, Senior Vice President, Monarch Beverage.

Clarity is Cost Effective

Clear hospital pricing is a little tricky to find at times, so a new way to gain some clarity on costs could lead to big savings for Indiana companies. It could also lead to public and private action toward lowering prices, which would be a big plus for Indiana business.

Data from RAND Corporation and Employers’ Forum of Indiana, Edited by Nick Dmitrovich.