A new report from Rice University’s Baker Institute for Public Policy compares the cost of receiving care at Baylor St. Luke’s Medical Center, Houston Methodist Hospital and Memorial Hermann-Texas Medical Center using insurers’ price transparency files. The data suggests that employers can use the new information to achieve significant savings by choosing insurers that have negotiated lower prices with the major hospitals and by encouraging workers to choose lower priced hospitals within their insurance plan.
The study found substantial variations in negotiated prices for identical services across the hospitals, even for patients with the same insurance. For example, a patient with Humana PPO insurance could be billed an average of $17,628 at Baylor St. Luke’s versus $57,898 at Memorial Hermann for the same overnight stay (averaged across 44 common diagnoses). The report also highlights the importance of insurer choice, noting that some insurance plans have negotiated considerably lower prices with TMC hospitals than with others. The average negotiated price for 18 common types of outpatient care at Houston Methodist is $7,746 if a worker has an Aetna HMO plan but only $3,125 if the employee has Humana PPO coverage.
“Our research shows that by using available price transparency data, employers can select insurers who have negotiated the lowest prices for the types of care their employees commonly use at the hospitals they prefer,” said Vivian Ho, the James A. Baker III Institute Chair in Health Economics at the Baker Institute. “Employers can also partner with benefits consultants to redesign health care benefits, potentially using tiered pricing or variable co-payments to encourage cost-effective care. Employees are likely to accept such changes if savings are shared through lower insurance premiums.”
Blue Cross Blue Shield of Texas stands out as the major insurer providing the most comprehensive pricing data. Other insurers frequently failed to disclose required information, either omitting prices entirely or reporting vague percentages without dollar amounts, Ho said.
“The Centers for Medicare and Medicaid Services, responsible for enforcing the Transparency in Coverage rules, has not issued any known penalties despite clear violations by insurers,” Ho said. “This lack of enforcement prevents employers from effectively using the data to lower health care costs. Employers could redesign benefits using this data — if it’s made available — to encourage use of high-quality, lower-cost providers. Without enforcement, the current model of employer-based insurance may become financially unsustainable.”