Bloomberg News

Insurers Pay Hospitals Twice Rate of Rivals in Some U.S. Cities

September 05, 2013

Residents of Kansas City, Missouri, and Indianapolis with private health plans face wide disparities in how much they pay for hospital care, depending on where they go for help, a study found.

The highest-priced hospitals in 13 cities studied are typically paid 60 percent more for inpatient services and almost double for outpatient care than the lowest-priced hospitals in the same communities, according to a study released today by the Center for Studying Health System Change (0575080D:US). Hospitals with more market power have greater muscle in negotiations with insurers and can extract higher prices, the group found.

Many patients are unaware of the prices private insurance plans pay to medical providers. Scrutiny of costs is growing as the 2010 Affordable Care Act seeks to expand coverage nationwide while lowering treatment costs. Health-care spending in the U.S. reached almost $2.6 trillion in 2010, more than 10 times what was spent in 1980, according to the Kaiser Family Foundation.

“Some hospitals are getting paid four times what Medicare would pay,” Chapin White, a senior health researcher at the Washington-based Center for Studying Health System Change and the lead study author, said in an interview. “Those high prices are a major contributor to premiums being as high as they are.”

The result is that average hospital prices for privately insured patients in the markets studied were 1.5 times Medicare rates for inpatient care and two times higher for outpatient care, according to the report.

Hospitals in Youngstown, Ohio and Flint, Michigan, were lower priced relative to Medicare when it came to inpatient care. The higher-paid hospitals were in Kansas City, Indianapolis and Kokomo, Indiana. Medicare is the U.S. health plan for the elderly and disabled.

Autoworkers’ Health

The report looks at claims data for about 590,000 current and retired, non-elderly autoworkers from Chrysler Group LLC, Ford Motor Co. (F:US) and General Motors Co. (GM:US) and their families in selected urban areas, including in Michigan, New York, Missouri, Indiana and Ohio. The report was funded by the National Institute for Health Care Reform, a group set up as part of automotive-industry union contracts.

Data released by the U.S. government in June also found outpatient hospital prices vary -- with hospitals in New York charging from $474 to $7,332 for a magnetic resonance imaging test. Information released by the U.S. Centers for Medicare and Medicaid Services in May also found hospitals charging prices that can be thousands of dollars different for the same medical procedures.

To contact the reporter on this story: Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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