On September 18, 2020, RAND Corporation released its Nationwide Evaluation of Health Care Prices Paid by Private Health Plans “designed to allow an easy comparison of hospital prices using a single metric.” This was Round 3 of its employer-led transparency initiative. Round 3 evaluated data from 2016 to 2018 from 49 of 50 states and the District of Columbia. The Evaluation covered $33.8 billion in hospital spending by self-insured employers, state-based all-payer claims databases and health plans at 3,112 hospitals.
Here are the key facts from Round 3:
- In 2018, employers and private insurers paid 247% of what Medicare would have paid for the same services at the same facilities, which is an increase from 224% in 2016 and 230% in 2017.
- Arkansas, Michigan and Rhode Island had relative prices under 200% of Medicare.
- Florida, Tennessee, Alaska, West Virginia, and South Carolina had relative prices that were above 325% of Medicare.
- Relative prices for hospitals is increasing at a compounded annual rate of increase of 5.1%.
- When professional and facility fees are compared, an average of 13% of overall hospital price difference relative to Medicare is driven by professional fees.
- Using both star ratings and Leapfrog Hospital Safety grades, it was determined that high-value hospitals (those offering low prices and high safety) exist throughout the U.S.
And key conclusions about potential employer cost-savings solutions:
- To effectively increase the use of lower-priced providers, employers need to change the underlying incentives for employees and their dependents
- High-deductible plans have limited success achieving this goal.
- Narrow networks, tiered networks, and reference pricing, which use patient cost-sharing incentives to shift patients towards lower-priced providers are effective at achieving this goal.
- An opportunity for immediate savings is to use cost-sharing incentives to move patient care outside the hospital.
- Employers should get involved in health care policy and regulatory matters.
To read the Round 3 Evaluation click here.
 Christopher M. Whaley et al., Nationwide Evaluation of Health Care Prices Paid by Private Health Plans, 1 (RAND Corporation 2020).
 Maryland was excluded due to its all-payer rate setting program. Id. at 3.
 Id. at 13.
 Id. at 13-14, 18-20.
 Id. at 24, 26.