Hospital Outpatient Prices Vary Widely for Managed Medicaid Insurers

The outpatient prices Medicaid managed care insurers pay to hospitals vary considerably based on geography and type of service, according to a cross-sectional study published on Nov. 28 in JAMA Network Open. The authors examined publicly available data and noted the results suggest the prices could affect government health expenditures and access to care for Medicaid members.

However, Jeffrey Marr, a Ph.D. candidate at Johns Hopkins University and the study’s lead author, acknowledges the analysis “raises more questions than it answers” in part because the researchers could not determine the reasons for the variation. Two health care insiders tell AIS Health, a division of MMIT, that the study reinforces there are still questions related to the usefulness of the hospital price transparency rule that went into effect in 2021 and the various definitions for prices.

“[Price transparency] has been a struggle in the industry,” Michael Lutz, a senior consultant at Avalere Health, tells AIS Health. “When you say price, do you mean the published rate that the hospitals and facilities charge? Do you mean the negotiated rate, which is going to vary for every payer that the provider negotiates with? Are you talking about the reimbursable amount after accounting for things like deductibles and co-pays?”

For this study, the authors partnered with Turquoise Health, a price transparency platform that “obtains payer and procedure specific negotiated rates that are publicly reported by hospitals, as required by the price transparency rule.”

The sample included prices for 30 shoppable services and emergency department visits from 1,487 general acute care hospitals, and it grouped them in three categories: surgery and medicine, imaging and emergency department. The authors noted that not all of the hospitals disclosed prices for each procedure. They then compared the fee-for-service Medicare rates with the managed Medicaid rates in 37 states and Washington, D.C., where there was a significant presence of managed Medicaid.

“We tend to think of Medicare rates as being a good benchmark of a reasonable price that insurers could be paying,” Marr tells AIS Health.

The median managed Medicaid prices were 69.8% of the Medicare rate for outpatient surgery and medicine services, 83.6% of the Medicare rate for emergency department services and 120.3% of the Medicare rate for imaging services.

In each of those three segments, there was wide variation across states. For surgery and medicine, the median managed Medicaid prices ranged from 18.6% of the Medicare rate in West Virginia to 133% of the Medicare rate in North Dakota. For imaging, the median prices ranged from 52% of the Medicare rate in Wisconsin to 371.7% of the Medicare rate in Utah. And for emergency department visits, the median prices ranged from 26% of the Medicare rate in Wisconsin to 176.9% of the Medicare rate in Washington, D.C.

“I think there’s any number of things that can be going on in terms of differences in state policies or market factors like negotiations between hospitals and insurers that could be driving this,” Marr says. “I don’t really want to speculate on what factors are actually causing it. That’s for further research.”

Hospitals May Make Errors In Reporting Prices

Marr adds that hospitals could have made reporting errors or disclosed incomplete data, which has been a common critique of the hospital price transparency rule.

Krutika Amin, associate director of KFF’s Program on the ACA, tells AIS Health that “there’s a lot of limitations with the hospital data.” Krutika and her colleagues wrote a brief in February that identified some issues with the data that hospitals publicly disclose, including inconsistency in what services prices correspond with and missing information such as the contracting method.

“These challenges do not result necessarily from lack of compliance with the rule; rather, these findings highlight its shortcomings in facilitating price comparisons,” Krutika and her co-authors wrote. “The complexity of using the data is largely due to a lack of standardization and specification in the reporting requirements.”

Although the rule requires hospitals to disclose standard charges for all the items, services and bundled services they have established rates for, the KFF researchers cited a February report from PatientRightsAdvocate.org that found just 24.5% of the 2,000 hospitals analyzed complied with all of the rule’s mandates. In addition, 48.7% did not post negotiated prices clearly associated with payers.

Amin notes, however, that the federal government is taking steps to improve transparency. Starting in 2024, as part of the Hospital Outpatient Prospective Payment rule that HHS passed last month, hospitals will be required to “encode all applicable standard charge information for an expanded set of data elements” in their machine-readable files. Hospitals must also affirm the information they disclose is accurate, use the same template and encode information in a consistent format.

“I think they got a lot of feedback saying that the lack of standardization for the hospital data was a huge issue,” Amin tells AIS Health. “It’ll standardize some of the data elements. But…if a given row is a professional charge or a facility payment, they’re not actually requiring hospitals to disclose that and so people could be averaging facility payment rate with a professional fee for a given service.”

Stacey Hughes, executive vice president of the American Hospital Association, said in a Nov. 2 press release that trade group would review changes to the rule “to ensure they continue to advance our shared objective with CMS of making it easier for patients to access pricing and cost information while reducing unnecessary administrative burden and costs on hospitals and health systems.”

Lutz notes that hospitals will likely continue to not disclose things like whether they have any value-based reimbursement arrangements that could impact prices and health care costs.

“We have to get more sophisticated in understanding not just what that data is telling us but what that data is describing,” Lutz says. “While we have this wealth of data available to us, the tools, the understanding and the definitions are still sort of in their infancy. They need to get much more nuanced to truly know what we’re talking about in terms of overall health care costs.”

Contact Marr at jmarr5@jhu.edu, Amin via Tammie Smith at tammie2@kff.org and Michael Lutz via Marita Gomez at marita.gomez@fishawack.com.

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Tim Casey

Tim Casey

Tim has been a reporter and editor for newspapers, websites and magazines for more than 20 years, including 10 years covering health care business topics. He has a deep knowledge of the managed care industry and pharmacy benefit management. He also has experience covering medical conferences and clinical and legislative health care issues. In 2014, the Society for Advancing Business Editing and Writing selected Tim as one of 15 journalists to participate in a national symposium on the Affordable Care Act. Tim has a B.A. in Psychology from the University of Notre Dame and an M.B.A. from Georgetown University.

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