W.S.J. May 10, 2019: Employers' Hospital Fees Differ

Prices paid to some hospitals, even in same city, ranged from double to more than 300% of what Medicare paid

By Melanie Evans

Patients at the Sidney and Lois Eskenazi Hospital in Indianapolis cost employers on average 133% of what Medicare paid.

How much companies including Fiat Chrysler Automobiles NV, Ford Motor Co. and General Motors Co. paid hospitals around the U.S. to treat their injured and sick employees varied widely and often exceeded what Medicare paid, according to a new study.

Prices paid to some hospitals, even in the same city, ranged from double to more than 300% of what Medicare paid, the study published online Thursday found.

The study reported the average prices paid by 50 employers and others to hospitals in 25 states for heart, knee and other categories of care from 2015 to 2017. It was posted online by the nonprofit research group Rand Corp. and the Employers’ Forum of Indiana, a coalition of employers, hospitals and health plans.

Prices have long been a closely guarded secret between hospitals and the health insurers that negotiate them. But more employers are sharing the data to curb rising costs.

Hospital inflation accounts for about one-fifth of the overall growth in U.S. health-care spending since 1960, according to the Centers for Medicare and Medicaid Services.

Supporters of greater transparency say releasing pricing data will help control spending on care by arming the companies who pay hospitals with better information to negotiate reimbursement rates.

The Trump administration is considering a requirement for hospitals and doctors to reveal negotiated prices.

Public prices are the “smelling salts” to rouse employers to use their buying power in the health-care market, said Chapin White, an adjunct senior policy researcher at Rand, which compiled the employers’ price-comparison data.

But so far there isn’t evidence that publicly available prices will lower health-care spending, said Amanda Starc, an associate professor of strategy at Northwestern University.

Ultimately, it will depend on employers and health insurers to take advantage of the pricing information, said Dr. Starc, an economist who has studied variations in the hospital prices paid by employers and insurers.

Doug Johnson, vice chairman of Indianapolis-based health-benefit consulting firm JA Benefits LLC, said the pricing differences need to be explored further to see if they result from hospitals overcharging or offering higher-quality care.

The newly published pricing information grew out of an effort by Indiana-based employers, who first collected and published hospital-payment information in 2017.

Local benefit and insurance executives said the availability of the data has yet to translate into meaningful cost savings so far, though they expect it will.

“In any other retail setting, as a consumer, you typically have information about what things cost,” Paul Marchetti, senior vice president of network and care delivery at Anthem Inc., said in an interview.

Anthem contributed medical-bills data to the newly published study, though some hospital contracts don’t allow publicly posting pricing data, Mr. Marchetti said.

An Anthem spokesman said the company doesn’t support regulation requiring price transparency because mandates stifle innovation and lack flexibility.

The newly published pricing information used medical bills from about 50 employers, health plans and two state databases of health-care spending.

The employers included Fiat Chrysler, Ford and General Motors, said Bret Jackson, president of the Economic Alliance for Michigan, who helped round up the pricing data from the state’s employers.

Ford and Fiat Chrysler declined to comment.

The dollar amounts found by the study don’t account for differences in wages, the cost of teaching medical students or losses from uninsured patients, which could be built into prices billed by hospitals. Yet the study compared the employer prices to payment data from Medicare, which does account for those differences.

In Indianapolis, patients hospitalized for conditions like heart disease cost as much as $23,292 at Community Hospital South, or 378% of what Medicare paid, according to the study. Patients at the lowest-priced hospital, the Sidney and Lois Eskenazi Hospital, cost $10,408 on average, or 133% of what Medicare paid.

Community Hospital Network, which includes the hospital, said the study “does not accurately reflect the total cost of care for employers” by focusing on costs for procedure categories. Prices also reflect other factors, such as hospitals’ technology, the types of services offered, drug prices, labor and the quality of medical care, the hospital said.

A spokesman for Sidney and Lois Eskenazi said no one was available to comment.