‘Flawed’ employer-backed insurance skews CT, MRI prices: study

More than a 10-fold gap exists between the highest and lowest negotiated price for common imaging services provided at the same hospital, new research shows.

The average maximum negotiated price between hospitals and insurance companies for 13 imaging services analyzed was 3.8 times more than the average minimum negotiated price in the same hospital, according to an analysis of data from more than 2,000 hospitals published Tuesday in Radiology. Commercial prices for high-cost services, such as CT and MRI scans, varied the most among the “shoppable” services, as defined by the Centers for Medicare and Medicaid Services, that were studied.

In the most extreme cases, the average maximum negotiated price for a brain CT scan was 17.9 times greater than the minimum price offered in the same hospital.

“Employers are fed up with paying too much and being the victims of egregious pricing practices of hospitals and specialists and weak negotiating by some of the health plans,” said Bill Kramer, senior advisor for health policy at the Purchaser Business Group on Health, a coalition of large non-hospital employers.

Employers, including those represented by the coalition, are increasingly reworking their coverage plans by contracting directly with hospitals and steering patients toward facilities that provide high-quality care at affordable prices. Still, employers are often hesitant to limit their employees’ options and potentially eliminate their preferred provider from their plans.

Data gleaned through the price transparency law for insurers that took effect in July will fuel new health plan benefit designs and has already prompted frank conversations between employers, hospitals and insurers, experts said.

“Only with greater transparency across the market can plan sponsors and health plans act on this information to ensure both high quality and a fair price for these critical services,” said Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, which represents employers.

The new study is the latest among years of analysis that demonstrates a significant difference in prices for widely used services. Researchers blame hospitals’ and physician groups’ size and negotiating leverage relative to insurers as well as insurers’ negotiating proficiency as well as reasons for the differences.

Price variation has a cascading effect, said Ge Bai, a professor of accounting and health and policy management at Johns Hopkins University and the co-author of the study. Not only are patients responsible for higher out-of-pocket costs associated with the highest-priced services, high healthcare prices also drive higher premiums and depress wages, she said.

“Premiums are projected to increase six to eight percent next year, and that eats into wage growth,” Bai said. “The most powerful force to bring down prices is employers, who can do direct contracting or designate a high-value imaging center and steer patients there. These efforts start slow but add up—hospitals might feel pressure to lower their prices if volume declines.”

Insurance companies are increasingly implementing reference-based pricing, where prices are based on a percentage basis of Medicare rates. Researchers found, though, that some health plans might have negotiated prices less efficiently than others.

“There are fundamental flaws of employer-sponsored plans,” Bai said. “But this is a good opportunity for employers to make healthcare purchasing more efficient.”