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Price Variation Among Payers Has Large Discrepancies

November 01, 2018

Although health care prices have historically varied based on the geographic market and among providers within the same area, a new report from the National Bureau of Economic Research (NBER) found that negotiated prices also differ across payers.

"Between-payer price variation is similar in magnitude to between-hospital price variation," the report authors explained.

According to the authors, health care consumer efforts have often focused on hospitals and physicians proving price information. However, they stressed that having data from payers would help prospective members choose plans based on additional factors.

For their report, NBER used data from the Massachusetts all-payer claims database, and focused specifically on negotiated payments for common services among six payers at 68 acute care hospitals. The researchers analyzed prices paid to providers for these similar services, and then NBER examined the negotiated payments for five services including, knee and hip replacements, vaginal and cesarean deliveries, and MRIs, and overall price levels for all inpatient care.

Based on the findings, the most expensive major payer was roughly 13% more costly compared with the cheapest major payer. The authors noted that this was compared with the highest-priced hospital system, which is 27% more expensive than the average of other hospitals. The study also demonstrated roughly 15% savings in negotiated priced for a low-price payer compared with a high-price payer, which was an average savings of $182 out-of-pocket.

The researchers also found that PPOs pay 3-5% higher prices than HMOs, and self-insured, administrative services only contracts pay 2-4% more than fully insured products.  

"While price transparency efforts have focused on helping consumers compare prices between providers before obtaining care, the earlier choice of which insurer to buy from will also have important effects on the healthcare prices consumers face," they wrote.

Julie Gould

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