Study finds variation in hospital pay scales
Wyoming’s self-insured employers are paying hospitals much more than what Medicare would pay for the same services, according to a RAND Corporation study.
St. John’s Medical Center is the Wyoming hospital that charges the least-above-Medicare rates for outpatient services. The standard price for all outpatient services was just over $220, or 284% of Medicare. On the other end of that spectrum is SageWest Health Care in Riverton, with a standard price of roughly $652, or 830% of Medicare.
“It points to where I believe real reform should occur in health,” said CEO Paul Beaupre. “And that’s the way as a nation we look to redefining the way we pay ultimately for health care.
“It’s very hard to understand now, and in some ways almost nonsensical, the way it’s being done,” he said. “To congratulate us that we’re 280% above because there are some hospitals in the state that are 800% above is just strange.”
Inpatient payments ranged from 125% of Medicare at Memorial Hospital of Sweetwater County in Rock Springs to 347% of Medicare at Wyoming Medical Center in Casper. St. John’s fell at 182%. In Wyoming the relative price for inpatient and outpatient services is just over 300%.
According to RAND, this is the first broad study that reports prices paid by private health plans to hospitals identified by name in a searchable Excel spreadsheet. The examination of hospital prices from 2015 to 2017 spans 25 states and 1,598 hospitals.
The study comes on the heels of various reports that point to exorbitant health care costs in Wyoming. The Health Care Cost Institute found that the median price of 242 out of 254 key health care services was higher in the Cowboy State than the median national price, by 150% on average.
Comparing with Medicare
Additional 2017 Health Cost Institute research found that Wyoming had the fifth-highest per-person average health care spending in the country.
And the News&Guide reported this winter that Wyoming has the highest average premiums in the nation for individuals who do not qualify for subsidies under the Affordable Care Act.
While the study points to other states like Kentucky, Michigan, New York and Pennsylvania as charging less, in the range of 150% to 200% of Medicare rates, charging more isn’t a Teton County- or a Wyoming-specific problem. Nationwide, providers tend to be paid a significantly higher amount from private insurers than Medicare, a nationwide health insurance program for those 65 or older.
Medicare issues a fee schedule determining the price it will pay on a service-by-service basis. Private insurers usually negotiate to pay a percentage of billed charges. Providers serving federally insured patients, be they Medicaid or Medicare, end up sometimes being reimbursed less than the cost to provide the services.
“The way that medicine in America has always been set up is that we cost shift then to the private insurer, and that’s how we cover our costs at hospitals to be able to have the services we offer,” Beaupre said. “I’m not trying to defend this payment; it just is what it is.”
The RAND study also points out a divergent theory.
“The other interpretation (the leverage story) is that hospitals, especially “must-have” hospitals, have used their negotiating leverage to extract unreasonable price concessions from health plans,” the report reads. “Those increasing prices, in turn, allow hospitals’ costs to increase, which makes Medicare prices look woefully inadequate by comparison.”
Prices at St. John’s
Every year, St. John’s calculates its charges. The cost of living here is factored into the calculation, as is the consumer price index for medical charges across the country. This fiscal year that amounted to a 2.8% price increase.
When certain service lines lose money due to the payer mix, Beaupre said, sometimes rates must be increased.
“We look at that very carefully when we go through our budget process,” he said.
Beaupre said the hospital has a good relationship with Blue Cross Blue Shield of Wyoming. If the hospital keeps its prices low, he said, Blue Cross will reimburse it at a higher percentage.
“We have to look for ways that we can get rewards,” he said. “Because if we were strictly dependent on federal reimbursement we’d have to curtail some of our services. We couldn’t run our business with that.”
There are prompt-pay 30% cash discounts for the self-insured at St. John’s. Major employers here that are in that category include Teton County and the hospital.
Employers can enact change
There may be some hope for employers whose jaws are agape reading the RAND-compiled prices. The study’s lead author, Chapin White, said in a press release that they can “exert pressure on their health plans and hospitals to shift from the current pricing system to one that is based on a multiple of Medicare or another similar benchmark.
“Employers can also encourage expanded price transparency by participating in multipayer claims databases such as that operated by the Wyoming Business Coalition on Health and promoting development of such tools,” White said in the release. “Transparency by itself is likely to be insufficient to control costs, so employers may need state or federal policy changes to rebalance negotiating leverage between hospitals and their health plans.”
The Wyoming Business Coalition on Health, a nonprofit that educates the business community across the state on health care quality, cost and payment reform, suggests employers push for transparency.
“Employers can use this report to become better-informed purchasers, and this report illustrates for policymakers that it is feasible and worthwhile to use claims data from private health plans to measure and compare hospital prices at a high level of detail,” the RAND report reads.
Other options the study suggests includes the Legislature limiting payments for out-of-network hospital care or allowing employers to buy into Medicare, as well as employers changing the terms of their contracts with hospitals.