Disparities in hospital pricing are costing multiemployer trusts
Think hospital pricing is all over the board with employers, multiemployer trusts, and other commercial payers footing a high bill? You’re not wrong. The RAND Corporation’s latest healthcare transparency study, “Prices Paid to Hospitals by Private Health Plans: Findings from Round 5.1 of an Employer-Led Transparency Initiative,” reveals wide disparities in hospital prices paid by private health plans across the U.S.—with private payers often paying much more that Medicare.
Price variation between Medicare and private insurers
The study analyzed 2022 claims data and found significant differences between what private health plans pay and what Medicare pays for the same services:
- Employers and private insurers paid, on average, 254% of Medicare rates for hospital inpatient and outpatient services, at the same facilities.
- In some states—like California, Florida, and New York—average prices exceeded 300% of Medicare rates.
- For ambulatory surgery centers (ASCs), commercial prices averaged 171% of Medicare ASC rates. If commercial plans had paid using Medicare hospital outpatient department (HOPD) rates, those same services would have averaged about 107%.
- For hospital-administered drugs, commercial plans paid an average of 281% of the Average Sales Price (ASP), while Medicare pays 106% of ASP for the same drugs.
Price variation between hospitals
The study also examined why hospital prices vary so widely. Contrary to what some might assume, differences in patient mix (i.e., share of Medicare or Medicaid patients) were not the primary driver. Instead, market power played a major role—hospitals in less competitive markets tended to charge significantly higher prices for the same services.
What can be done?
Our take-away: It is clear that multiemployer trust funds—and commercial payers in general—are not always getting the best value for hospital services. At Rael & Letson, we can help plans harness transparency data to evaluate network performance and identify more cost-effective options. Want to explore how transparency tools can lower your healthcare spend? Let’s talk.
Read more about the key findings of the RAND study and download the report.