The RAND Report on Hospital Pricing: Why Should Brokers Care?
U.S. healthcare costs are clearly out of control, skyrocketing by nearly $1 trillion from 1996 to 2015. While both the U.S. population and healthcare utilization increased over that time period, the average spend per treatment accounted for 50% of that increase¹. As the numbers point out, the cost of caring for patients has doubled with hospital care being a major contributor to that increase. As the case is with hospital charges, it’s not easy to determine a hospital’s pricing or why costs vary from one hospital to the next.
That’s why a recent, independent report by the RAND Corporation has received so much attention. Based on data from 1,598 hospitals in 25 states, the report found that prices paid to hospitals for privately insured patients averaged 241% of what Medicare would have paid. For outpatient care, the private prices were almost triple what Medicare would have paid. These prices represent an increase of 5% from just two years ago, a steady upward trend that shows no sign of stopping.
For brokers, this report can be used to help their clients better understand current problems with healthcare pricing and why the employers they serve might consider developing alternative plans to address these problems.
Equally important, the report showed an enormous disparity among hospital prices across the country. Depending on the state, costs ranged from 150% to 300% of Medicare prices. That’s a huge swing from state to state, as the graphic below illustrates.
The RAND report is the first time that pricing information on a large group of individual hospitals has been made public². Some employers found they were actually paying eight times what the federal government paid for certain outpatient services like emergency room visits, X-rays or even just a checkup.
Tucked away in the report is a sentence that will be music to your clients’ ears: “The wide variation in hospital prices represents an important opportunity for employers to save money.” The reports goes on to offer recommendations and opens door to conversations you can have with your clients about introducing new cost-saving strategies into their self-funded plans.
Use the RAND report to start client discussions around:
As a credible and independent source of information and analysis, the RAND report makes a strong case for brokers to push their clients to optimize their current healthcare plan. There are a few key pieces of insight in the report that may be helpful for the employers you work with to fully comprehend:
As a broker, you can use the latest RAND report to educate your clients and help them develop healthcare plans based on proven approaches such as direct contracting and RBP. Healthcare costs will continue to be a major expense for employers — that’s almost a certainty. But what’s also certain is the proven ability of innovative healthcare plans to hold the line on costs and empower employers to grow their businesses, all while improving the quality of healthcare.
2 https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf, page iii;