Hospitals charge significantly higher fees for common medical procedures

A recent study conducted by researchers at Johns Hopkins University and published in JAMA Health Forum reveals that hospitals in the United States charge more than 50% higher fees than surgical centers for the same medical procedures.

Higher fees for standard colonoscopies

The study specifically examined the fees associated with standard colonoscopies covered by private health insurance. On average, hospitals billed $1,530 in facility fees for these procedures, while ambulatory surgical centers charged an average of $989. The price gap was even wider for colonoscopies involving biopsies or removal of polyps.

Hospitals’ fees compared within the same county and insurer

The researchers also compared the fees charged by hospitals and surgical centers within the same county and contracting with the same insurance provider. The findings showed that hospital fees were 54% to 61% higher than surgical centers’ fees, emphasizing the significant price disparity between the two.

Hospitals’ market power and health plans’ incentives

Impact on patients’ cost sensitivity

Colonoscopies are widely used for colorectal cancer screening, with more than 15 million procedures performed annually in the U.S. The Affordable Care Act mandates insurance coverage for these screenings, which potentially creates an opportunity for hospitals to take advantage of patients’ lack of price sensitivity.

New data analyzed under transparency in coverage rule

This study is one of the first to rigorously analyze data released under a “transparency in coverage” rule, which necessitates health insurers to disclose their negotiated rates for covered services for each plan and provider in their network. Rates disclosed by major health insurers, such as Cigna Group and UnitedHealthcare, were included in the analysis.

This research sheds light on the significant price differences between hospitals and surgical centers for common medical procedures. It raises important considerations regarding hospitals’ market power and the financial incentives faced by health plans. With increased transparency, patients and insurers can make more informed decisions about their healthcare choices.

Equalizing Payments for Healthcare Services

The healthcare industry has been grappling with the idea of equalizing payments for identical services performed at different types of facilities. Medicare, for instance, generally pays more for services delivered in hospital outpatient departments compared to ambulatory surgical centers. However, recent developments suggest that policymakers are starting to support the notion of eliminating these payment disparities.

The Lower Costs, More Transparency Act, recently passed by the U.S. House of Representatives, seeks to equalize Medicare payments for physician-administered drugs, regardless of whether they are provided in a hospital outpatient department or an independent doctor’s office. This legislation represents a step towards achieving payment parity across various healthcare settings.

Implementing such “site-neutral” payment policies for a broader range of services, including clinic visits and imaging, could yield significant cost savings. According to a report by the Committee for a Responsible Federal Budget, these policies could save the federal Medicare program $153 billion over ten years and reduce premiums and cost-sharing for Medicare beneficiaries by $94 billion. Furthermore, in the commercial insurance market, site-neutral payment policies have the potential to reduce premiums by $386 billion and patient cost-sharing by $73 billion over a decade.

While these payment equality measures have garnered support, they have also faced opposition from hospital industry groups. These groups argue that hospitals should be compensated differently due to their higher level of regulation and the complexity of their patients. However, proponents maintain that payment considerations should be neutral across facilities, irrespective of the level or quality of care provided.

In conclusion, equalizing payments for healthcare services is an ongoing topic of debate within the industry. While some believe that taking into account factors such as patient complexity and regulatory oversight is essential, others argue that payment policies should be neutral and promote cost containment. Ultimately, finding a balance that addresses multiple concerns will be crucial in shaping the future of healthcare payment systems.

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