Hospitals’ fees for one of the most common medical procedures in the U.S. are more than 50% higher than surgical centers’ fees for the identical procedure, according to new research published Friday.
For standard colonoscopies covered by private health insurance, hospitals billed an average of $1,530 in facility fees, compared with average fees of $989 at ambulatory surgical centers — facilities that specialize in outpatient procedures, according to the peer-reviewed study led by researchers at Johns Hopkins University and published in JAMA Health Forum. Price gaps were even wider for colonoscopies involving biopsies or removal of polyps, the study found.
Looking at procedures performed within the same county at facilities contracting with the same insurer, the researchers found hospitals’ fees were 54% to 61% higher than surgical centers’ fees.
The findings underscore hospitals’ market power while also suggesting that health plans “leave money on the table,” said Ge Bai, professor of accounting and health policy and management at Johns Hopkins and co-author of the study. Insurers face conflicting incentives, Bai said, as controlling costs and reducing premiums may help them gain market share, but higher medical spending can also boost their profits as they adjust premiums to compensate.
More than 15 million colonoscopies are performed in the U.S. each year, as the procedures are widely used for colorectal cancer screening. The U.S. Preventive Services Task Force recommends screening adults age 45 and older. But the Affordable Care Act generally requires insurers to cover colonoscopies free of charge to patients, leaving the door open for hospitals to take advantage of patients’ lack of price sensitivity, Bai said.
The Johns Hopkins study is one of the first to rigorously analyze new data released under a “transparency in coverage” rule that took effect last year and requires health insurers to disclose their negotiated rates for covered services under each plan and provider in their network. The researchers looked at rates disclosed by several major health insurers, including Cigna Group
CI,
and UnitedHealth Group Inc.’s
UNH,
UnitedHealthcare.
The new rule was designed to stir market forces to help contain costs. But for it to work as intended, Bai said, “people have to use price transparency to shop.”
The study highlights an idea that’s highly controversial in the healthcare industry but has lately won some support from lawmakers: Equalizing payments for identical services performed at different types of facilities. It’s already well documented that Medicare often pays more for services delivered in hospital outpatient departments than in ambulatory surgical centers, sparking proposals to eliminate those gaps.
The latest development on that front came just this week, when the U.S. House of Representatives passed a bill known as the Lower Costs, More Transparency Act, which would equalize Medicare payments for physician-administered drugs, whether they’re provided in a hospital outpatient department or independent doctor’s office.
Using such “site-neutral” payment policies to equalize Medicare payments for a broader set of services, including clinic visits and imaging, could save the federal program $153 billion over 10 years while reducing premiums and cost-sharing for Medicare beneficiaries by $94 billion, according to a report by the Committee for a Responsible Federal Budget, a nonprofit public policy group. In the commercial insurance market, policies encouraging site-neutral payments could cut premiums by $386 billion and patient cost-sharing by $73 billion over a decade, the group found.
The idea of equalizing payment across different types of facilities has drawn strong opposition from hospital industry groups, who say hospitals’ higher level of regulation and more complex patients should factor into payment considerations. “There is nothing neutral about site-neutral payment policies–not the level or quality of care, not the patient complexity, and not the enhanced regulatory oversight of hospitals,” American Hospital Association executive vice president Stacey Hughes said earlier this month in a letter to House leaders.
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