Hospital Prices Vary Widely Across New York State, Study Finds

Hospital reimbursements vary widely within New York State, and a hospital's bargaining power in negotiating with insurers is a key factor in price disparities, a report from the New York State Health Foundation finds.

Based on non-public data from nine health insurers and negotiated contracts with more than a hundred hospitals in the state, the report, Why Are Hospital Prices Different? An Examination of New York Hospital Reimbursement (151 pages, PDF), found significant differences in overall price levels among hospitals of similar size, service provision, and teaching designation, regardless of the general health of the patient population or the complexity of the services provided. Indeed, some hospitals were found to be between 1.5 times and 2.7 times more expensive than the lowest-priced hospitals in the same region, although hospitals with high prices did not necessarily have higher quality scores and those with lower prices did not necessarily have lower quality scores.

According to the study, hospitals in the downstate region that serve more Medicare and Medicaid patients garner lower prices in the private commercial market, while hospitals that serve fewer Medicare and Medicaid patients charge higher prices — counter to a widely held belief that a hospital negotiates for higher commercial prices to offset lower reimbursements for its publicly insured patients. In addition, the report found that prices are higher, in general, at hospitals that have greater market share and at those that are part of a hospital system with a large market share, as well as at those in the Albany region that are considered rural and face less competition.

The study also found that certain practices and contract provisions impede competition and transparency, including variation in reimbursement method among hospitals (which prevents some insurers from comparing prices within networks) and "confidentiality language, anti-steering language, and language that hinders the ability of the tiered network product to work efficiently." The report's recommendations include barring such contractual language, exploring ways to simplify reimbursement methodologies, and monitoring and reporting provider price information to identify potential market dysfunctions.

"This landmark report helps explain what is happening at the negotiating table between hospitals and insurance plans and how it results in such wide price variation," said David Sandman, president and CEO of NYSHealth. "Transparency is the future. Policy makers and other stakeholders can use these findings to address market dysfunctions that may be compromising consumers' health and wallets and help make health care more affordable for New Yorkers."

"Hospital Prices Vary Widely, Associated With Market Power." New York State Health Foundation Press Release 12/19/2016.