Prices vary within hospitals: Why patients should price shop payers

Research on price variation in healthcare often shows the stark differences patients pay for the same procedure at one hospital compared to another. However, a working paper published by the National Bureau of Economic Research suggests payers play an equally significant role in price variation, even within the same hospital.

For the study, researchers analyzed claims data for patients ages 18 to 64 at 68 acute care hospitals in Massachusetts from 2009-11. They focused on five procedures: hip and knee replacements, vaginal and cesarean deliveries, and MRIs, and collected data from three major payers: Blue Cross Blue Shield, Tufts Health Plan and Harvard Pilgrim.

For these five procedures, the researchers found prices within the same hospitals varied across payers by 16 to 28 percent. They found the most expensive payer was 13 percent more expensive than the least expensive payer on average. This means patients with high-deductible health plans could save an average $182 out of pocket by choosing the lower-priced payer over the higher-priced one. Self-insured employers stand to save even more — from $750 to $1,000 per enrollee, according to the report.

Variation across payers within hospitals is significant because it eliminates the variable of quality — the researchers assumed the quality of care was fairly consistent within a hospital. It also eliminates patient mix issues — patients who live near the same provider likely have similar risk profiles.

"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. All else equal, consumers should prefer plans offered by insurers with lower negotiated rates," the authors wrote.

More articles on payer issues:

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Utah insurer will pay for members' travel to Mexico to fill pricey prescriptions

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