Policies reducing price variations may produce savings, stu…

Policies reducing price variations may produce savings, stu…

Dive Brief:

  • Payers in Massachusetts could have saved a significant amount of money by steering patients to low-cost providers (almost 13% savings) or setting a price ceiling at the 75th percentile (9% savings), according to a study published in the September issue of Health Affairs.
  • To arrive at those savings estimates, Harvard University researchers analyzed variations in the prices commercial insurers paid for 291 predominately outpatient services in Massachusetts, finding significant variations weren’t attributable to geographic differences or business costs. For example, prices at acute care hospitals were 76% higher, on average, than in other settings.
  • Among service categories, the largest price variations were for ambulance and transportation services, physical and occupational therapy, and laboratory and pathology testing.

Dive Insight:

The large variation in prices for healthcare services is a heated topic of national debate. At issue are the prices providers and payers negotiate privately for inpatient and outpatient healthcare services.

UnitedHealth Group, parent company of the nation’s largest commercial insurer, released several pricing studies this year. In one analysis, the company found significant pricing variation for seven common diagnostic tests, such as echocardiograms, mammograms and ultrasounds. For example, the price it paid for an echocardiogram in 2017 varied from a low of $210 to a high of $1,830.

Meanwhile, CMS released a proposed rule in July that would require hospitals to disclose payer-specific negotiated rates for about 300 non-urgent services in an easy-to-compare format. The transparency proposal is aimed at making it easier for consumers to comparison shop for healthcare services.

Both hospitals and payers oppose the proposal, arguing it will stifle competition in the market and inadvertently harm patients.

In the Health Affairs study, researchers at Harvard’s T.H Chan School of Public Health analyzed data on median fee-for-service prices paid by eight commercial insurers in 2015 for 291 predominately outpatient services. They obtained the data from the Center for Health Information and Analysis, a state agency. They compared prices at the statewide level and hospital service areas.

In a price-steering simulation, the researchers reallocated services from providers above the 75th percentile within an insurer and an HSA to lower-priced providers, mimicking the impact of potential policies developed by individual payers.

In the price-ceiling scenario, they calculated changes in total spending by capping the prices paid to high-price providers at the statewide 75th percentile, simulating the effect of a potential statewide price-setting policy.

Overall, the researchers found higher prices in the eastern part of the state, the Boston area and near the borders with Rhode Island and Connecticut. Martha’s Vineyard and Nantucket had the highest prices.

For physical and occupational therapy, prices at hospitals were 199% higher than other settings, while laboratory and pathology testing services were 100% higher. Prices for other services also were higher at hospitals versus other settings: 37% higher for eye exams, 53% higher for colonoscopies and endoscopies and 67% higher for radiology services.

However, prices at hospitals were 25% lower for office visits compared with other settings.

Providers in the highest-price decile for physical and occupational therapy and laboratory and pathology testing also had large market shares, the study found.

“While preliminary, our findings provide a roadmap for ways that consumers and purchasers can save money not only through choice of providers but also through choice of insurers,” the researchers wrote.

Transportation Services Jonathan Cartu

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