Healthcare News & Insights

New report paves way for more cost scrutiny

Get ready for closer scrutiny of your facility’s inpatient and outpatient hospital costs – and surprisingly, it’s not coming from Medicare this time around. 

100-dollar-bills-stethescope-flagA new report released by a healthcare nonprofit outlines some of the sharpest differences in the cost of care for privately insured patients in similar geographic areas and markets.

The Health Care Cost Institute (HCCI) has compiled its Healthy Marketplace Index Report. According to a press release, the report shows the cost of care in more than 40 healthcare markets in the country.

Some of the general “high price areas” for healthcare costs include Milwaukee and Philadelphia, while “low price areas” include New Orleans and Tuscon, AZ.

Each market has its own quirks, but HCCI noticed three significant trends:

  1. Pricing isn’t tied to level of healthcare use. A natural assumption is that in areas where healthcare costs are higher for patients, patients use fewer healthcare services. But that’s not always the case. Areas such as Denver and Palm Bay, FL, rank highly for both inpatient care price and use of inpatient care services.
  2. Prices aren’t consistent. Pricing variations weren’t consistent across different types of care, even in the same area. Areas with higher prices for inpatient care didn’t always have higher prices for outpatient care as well, and vice versa. Example: Miami had high prices for outpatient care, but low prices for inpatient care.
  3. There may be a relationship between inpatient services and general health. In areas with more patients using inpatient services, there were lower rates of premature death. Although this relationship wasn’t closely analyzed in the report, it’s worth noting for hospitals, especially as inpatient hospital stays draw more scrutiny from third-party payors.

Transparency & pricing

While pricing varies sharply, there are stark differences in how much patients pay out of pocket for common medical procedures – in some cases, they amount to hundreds of dollars.

More states are demanding that hospitals be more transparent about the cost of the services they provide patients. And there’s also a demand for more consistency in pricing across all healthcare markets.

While Medicare’s exploring the use of bundled payments for certain services to offer some stricter price controls, other insurance plans are trying programs with “reference prices,” where they’ll only reimburse hospitals for a certain amount and leave the rest up to patients to pay.

And if these kinds of models take hold, patients will be clamoring for even more information – from both their insurance carriers and their hospitals – about how much services cost.

Some hospitals have already made steps to determine just how much their care costs. Data like what’s included in the HCCI report only puts more pressure on healthcare executives to justify why treatment costs at their facilities aren’t the same as the hospital down the road – or even in a neighboring state.

In this era of growing price transparency and scrutiny of expenses, it won’t be enough for hospitals to simply blame private payors for setting prices. They’ll be expected to answer detailed questions about their payment rates in comparison to other facilities. And they’ll also be fielding the same questions regarding uninsured patients.

Hospitals should start preparing for this increased scrutiny by reviewing their payor contracts and getting a clear handle on the general cost of healthcare services both in their immediate area and in other areas with similar demographics.

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