Employers Pay Hospitals Billions More Than Medicare

How Much More Than Medicare Do Private Insurers Pay? A Review of the  Literature | KFF

Source: Axios, by Adriel Bettelheim and Caitlin Owens

Employers and private insurance plans in 2020 paid hospitals 224% of what Medicare paid for the same services, with rates for inpatient and outpatient care varying widely from site to site, a new report from RAND finds.

The intrigue: The report found that hospital prices had no significant correlation with hospitals’ share of Medicare and Medicaid patients, which hospitals say factor into private rates. Price did positively correlate with hospital market share.

Why it matters: Hospitals account for about 37% of health spending for the privately insured — and even people who don’t use hospital services foot some of the bill through their premiums.

The big picture: Annual per-person spending growth for workplace health coverage has exceeded spending growth for government programs in nine of the past 13 years, largely because enrollment and demand for services among the commercially insured has barely changed.

  • * The divergence in pricing has been linked to mergers and acquisitions, affiliation agreements and other consolidation that increases hospitals’ leverage.
  • * In 2021, the average premium cost of an employer-sponsored family plan was more than $22,000, an increase of 47% from 2011, according to the Kaiser Family Foundation.

What they found: The report draws on medical claims data from employers and state databases from 2018 to 2020 covering 4,102 hospitals and 4,091 ambulatory surgical centers that account for $78.8 billion of spending.

  • * States like Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while others including Florida, West Virginia and South Carolina had prices at or above 310% of Medicare levels.
  • * In 2020, COVID-19 inpatient hospitalizations averaged 241% of Medicare, which is similar to the relative price for all inpatient procedures.
  • * Prices for common outpatient services performed in ambulatory surgical centers such as imaging and colonoscopies averaged 162% of Medicare payments. However, Medicare pays the centers less than it pays hospital outpatient departments for the same services, the study notes, and the ratio would be lower if centers were paid the same way.
  • * Medicare per-procedure payments to hospital outpatient departments were 2.1 times higher than payments to ambulatory surgical centers and commercial payments were 2.6 times larger, the study found.
  • * If the same providers were paid Medicare rates for the same services, employers and private plans would have saved $49.9 billion, researchers said.

The other side: Hospitals say Medicare reimbursement rates are too low, so they have to charge privately insured patients more to make ends meet. The pandemic has also disrupted many hospital business models — for example, by forcing the cancellation of elective procedures.

The bottom line: Health costs are likely to keep rising for those with private insurance as employers use higher deductibles, copays and coinsurance to offset some of the rising costs.

  • * While employers back reforming how workplace health care is paid for, they don’t agree on many of the details or how significant changes would be.
  • * The more information about pricing disparities that becomes public, the more likely it is that pressure on hospitals to justify their prices will build.

Leapfrog Group: Patients report worse hospital experiences during COVID-19 pandemic, raising safety concerns

Leapfrog sees 'significant' infection increases across its largest-to-date  release of hospital safety grades | Fierce HealthcareSource: Fierce Healthcare, by Dave Muoio

The latest batch of hospital patient safety ratings from the Leapfrog Group shows a general decline among “several” hospital safety measures concurrent with the onset of the COVID-19 pandemic, according to the healthcare safety watchdog.

 

Released Tuesday, the scores are accompanied by a report from Leapfrog that highlights a “significant” decline in the experiences of adult inpatients at acute care hospitals during the pandemic, with many areas “already in dire need” prior to the pandemic deteriorating even further.

“The healthcare workforce has faced unprecedented levels of pressure during the pandemic, and as a result, patients’ experience with their care appears to have suffered,” Leah Binder, president and CEO of the Leapfrog Group, said in a statement.

 
 

Leapfrog’s twice-annual reports assess more than 30 patient safety measures and component measures compiled from the Centers for Medicare & Medicaid Services (CMS) and Leapfrog’s hospital surveys between July 2018 and March 2021. The most recent release assigns letter grades to nearly 3,000 U.S. general hospitals and is the second collection of scores to incorporate safety and experience data from the COVID-19 pandemic.

This time around, Leapfrog assigned 33% of hospitals an “A,” 24% a “B,” 36% a “C,” 7% a “D” and less than 1% an “F”—a roughly equivalent distribution to those given in the fall.

Eight states had 50% or more of its hospitals receive an “A” grade, with North Carolina (59.8%) and Virginia (59.2%) leading the way.

 

On the other end of the spectrum, Wyoming, West Virginia, North Dakota and the District of Columbia had zero hospitals that received an “A” from the watchdog.

As before, Binder said that the “significant variation in safety performance” across different facilities underscores the need for public access to hospital assessment tools “so patients can make the best decision for themselves and their loved ones.”

Alongside the scores, Leapfrog placed a spotlight on patient experiences in a report comparing Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) scores across more than 3,500 U.S. hospitals before (2019) and during (mid-2020 to mid-2021) the COVID-19 pandemic.

The group found statistically significant declines between the survey periods in the average percentage of hospital patients who gave the most favorable responses for nine of the 10 HCAHPS measures.

 

The greatest decline was seen among patients’ experiences with hospital staff responsiveness (a 3.7 percentage point decrease), followed by communication about medicines (a 2.9 point decrease), and cleanliness of the hospital (a 2.9 point decrease).

Leapfrog noted that these patient experience areas and others—like understanding care transitions (which already claimed the least favorable responses)—are directly tied to patient safety events and likely took a hit due to pandemic strains on the healthcare workforce.

“We commend the workforce for their heroic efforts these past few years and now strongly urge hospital leadership to recommit to improved care—from communication to responsiveness—and get back on track with patient safety outcomes,” Binder said.

The inpatient experience report is the second in a series of three such analyses from Leapfrog focused on patient experience during the pandemic. The first report, released in early April, focused on a decline in favorable patient ratings for communications about procedures across ambulatory surgery centers and hospital outpatient departments alike.

Leapfrog’s broader Hospital Safety Grade rankings are available online as a free resource for patients and their families. The organization said its analyses are independently assessed and peer-reviewed, with the methodology of the scoring available online for review.

The prior round of ratings highlighted “significant” declines in hospitals’ performance on preventable hospital-acquired infections. Those findings echoed similar concerns from patient experience intelligence firm Press Ganey and the Centers for Disease Control and Prevention.

KLAS: Hospitals Say Price Transparency Remains Too Confusing And Pricey To Implement

Hospitals say price transparency pricey to implement

Source: Fierce Healthcare, by Robert King

Hospitals and health systems believe a price transparency rule, while well-intentioned, is far too expensive to implement and is confusing, a new report found.

 

The report released Thursday from the health IT firm KLAS Research underscores major compliance issues surrounding a landmark rule that requires hospitals to post payer-negotiated rates for certain services in an easy-to-understand format. Compliance with the rule has been scattershot since it went into effect last year.

“There are concerns about cost, data accuracy and patient options of pricing tools; some respondents worry about patients’ ability to understand the displayed pricing data, and today, most patients are unaware online pricing information exists,” the report said.

Hospitals must offer clear pricing estimates for at least 300 shoppable hospital services and could face fines for each day of noncompliance.

KLAS spoke with 66 revenue cycle leaders to get a sense of how hospitals feel about the shift towards price transparency and the nuts and bolts of implementing the rule more than a year after its compliance deadline.

“Many hospitals comply only because they are required to by law and because they want to avoid monetary penalties,” the analysis said. “Additionally, organizations struggle to find resources to help with compliance because of the financial burden of investing in a regulation that doesn’t provide a return on investment.”

Throughout 2023, respondents say they are going to have to continually invest in new employees and technology to meet the mandate.

Among those surveyed, 52% said that the rule requires a significant number of resources to comply while 40% put resource requirements at a moderate level and 8% at a small number.

Many of the respondents lashed out at two parts of the rule: the requirement that facilities use machine-readable files for the pricing information and that they put online a master list of rates.

Respondents cited problems with “software used to publish the pricing information. Some say the published rates mainly benefit payer and provider organizations instead of patients.”

 

KLAS also explored how hospitals are looking to comply with the rule.

Third-party vendors were the most popular option, employed by 36% of respondents, while 28% who relied on their electronic medical record vendor. Only 18% relied on internal services and 18% were unsure.

The vendor that respondents most used for help was Epic, used by 16 of the revenue cycle leaders, followed by Experian Health with eight.

“Some who currently use a third party say they will consider moving to their EMR vendor’s platform in the future to further consolidate systems,” KLAS’ report said. “For example, some Epic EMR customers who use a third party for price transparency intend to move to Epic’s offering once it becomes more robust.”

report released back in February showed that one year after the rule’s implementation only 14.5% of hospitals are fully compliant with the rule. CMS has warned more than 300 hospitals about non-compliance.

And more than a year after it went into effect, KLAS’ survey shows that confusion around the rule still reigns.

“Many organizations are not investing beyond the bare minimum requirements, and they don’t plan to do more until there is further clarity around the regulations and the expectations going forward,” KLAS wrote.

Respondents say they don’t know what types of resources are going to be required in the future as “price transparency rules evolve or are interpreted differently.”

Do Wellness Programs Actually Help People Manage Chronic Conditions?

Forty-four percent of consumers enrolled in wellness programs have a diagnosed chronic condition, according to a HealthMine report. But just 14% say that their wellness program helps them manage their disease. Only 29% say their wellness program offers a disease management program. Only 11% participate in disease management through their wellness program. And just 6% have connected a disease management application/tool to their wellness program. Bryce Williams, CEO and president of HealthMine says, “Health plans and wellness programs need to have real time analytics that guide each member on health actions. We are loaded with health data including lab results, insurance claims and more, but we are not analyzing the data or offering recommendations consistently enough. Programs that do will close gaps in care, thus helping members manage their chronic conditions and minimize costly co-morbidities and utilization.”

Expensive Drugs Are Becoming More Accessible Under Exchange Plans

ACA exchange plans are making some drugs more accessible to patients in 2016. Plans are less likely to place all drugs for conditions, such as HIV, cancer, and multiple sclerosis (MS) in a class on the highest cost-sharing tier, according to a report by Avalere. The study looked at Silver plans across 20 classes of medications. In five medication classes, some plans all drugs on the highest tier including drugs to treat HIV, cancer, and MS. However, fewer exchange plans are doing so in 2016 than in the prior two years.

As in prior years, the anti-angiogenics class, used to treat cancer, was most often subject to universal placement on the specialty tier. Half of all Silver plans placed all covered drugs in this class on the specialty tier in 2016. Nearly one-third of Silver plans place all covered MS drugs on the specialty tier as well, though this rate is down 14% from 2015. The sharpest decline is for molecular target inhibitors at 18%. For these three classes, 2016 reversed the sharp increase in this tiering structure.

Since the launch of exchanges in 2014, patient groups and policymakers have considered how formulary designs could affect patients’ ability to access medications. At the same time, plans strive to offer innovative benefit designs with low premiums. CMS has issued guidance discouraging plans from placing all drugs for a condition on the highest tier without regarding the cost of the medication. The federal government has not yet created a tool for regulators to evaluate benefit designs in this regard. California passed legislation preventing plans from placing all drugs for a condition on the highest formulary tier beginning in 2017

The Cost Implications of Private Exchanges

Private exchanges could encourage employees to select less-generous plans, according to a report by Rand. This could expose employees to higher out-of-pocket costs, but premium contributions would drop substantially, so net spending would decrease. On the other hand, employee spending may increase if employers decrease their health insurance contributions when moving to private exchanges. Most employers can avoid the ACA’s Cadillac tax by reducing the generosity of their plans, regardless of whether they move to a private exchange. There is not  enough evidence yet to determine whether private exchanges will become prominent and how they will affect employers and their employees.

Workers who choose less-generous plans could risk higher out-of-pocket costs. But their net spending would drop because premiums would drop substantially. Average employee spending could increase if employers lower their health insurance contributions when moving to private exchanges. Private exchanges are unlikely to significantly affect the ACA’s Small Business Health Options Program (SHOP) Marketplaces.

What Consumers Are Saying About Obamacare and Cancer Coverage

When consumers talk about Obamacare online, cancer is the most frequently discussed health condition, according to a report by Treato. Online, consumers discuss cancer 2.5 times more often than any other health condition. When discussing cancer, the leading topics are breast, lung, and colon cancers. Online discussions about Obamacare generally skew negative among cancer patients, but those who are positive express extreme gratitude. Twenty percent of patients and caregivers on cancer forums express gratitude and 48% have various criticisms about Obamacare.

Conversations about the downside of Obamacare’s cancer coverage generally fall into two categories: dissatisfaction with coverage and frustration with the lack of plan options. Consumers discuss the challenges of deciphering insurance rules to get the coverage they want, and confusion about subsidies, exclusions, inclusions, and co-pays.

Consumers are also complaining that certain groups are gaining more from Obamacare. The strongest criticisms are about women having access to more preventative screenings and more coverage for conditions, such as for breast cancer, and the poor getting free coverage. Consumers are also critical of other health conditions getting less coverage than cancer.

Consumers complain about losing good private insurance plans because of Obamacare and paying more out-of-pocket for cancer treatment. Many say that Medicare and Medicaid are simpler to access and easier to understand. Those who like Obamacare cite preventative screenings, coverage of pre-existing conditions, removal of lifetime limits on coverage, and the affordability of coverage

How the Affordable Care Act Challenges Insurers

In the past year, the Affordable Care Act (ACA) has had a more pronounced effect on large and small health insurance carriers, according to an A.M. Best report. The fact that the enrollment population continues to be older and riskier, is having a bigger negative financial effect than anticipated.

Publicly traded companies fared well, reporting an increase in earnings through Sept. 30, 2015. The ACA health insurer fee has affected insurers’ earnings. It was $11.3 billion in 2015 and is a similar amount for 2016. Since the fee is not tax-deductible, it has a greater effect on net income. Many insurers have compensated for the fee through premiums. Since some government-funded programs are more sensitive to premium increases, carriers have not been able to consistently pass the fee along in rates.

To alleviate the growing financial pressure, health insurers are looking at initiatives to control the cost of care, such as disease management programs and better care coordination. As a result, there has been increased collaboration with providers that can benefit all parties involved, including the patient.

Merger and acquisition activity accelerated in 2015 with several large transactions announced during the year. The desire for further diversification is driving the mergers and acquisitions among insurance companies and other health-related businesses. A.M. Best’s outlook for the U.S. health insurance sector was recently revised to negative from stable, largely due to earnings and capitalization pressures as a result of the ACA. The industry pressures are expected to continue to hurt earnings. The lower earnings and growth in premiums from increased membership will result in lower levels of risk-adjusted capitalization.

The merger and acquisition activity will bring additional earnings pressure to the bigger carriers since they will need to service higher debt loads. Since many of these pressures will not subside in the near term, A.M. Best says that there could be more negative rating actions on health insurers.

The report also explores other trends, such as how health insurers are viewing cyber risk, changing consumer demands, emerging member-focused insurers, rising pharmaceutical costs, and 2015 rating trends

Maintaining Reliable Provider Directories for Health Plan Shoppers

A new report by the California HealthCare Foundation examines how Colorado, Maryland, New York, and Washington overcame obstacles to develop well-functioning provider directories. The goal of the report is to inform California policymakers and stakeholders as they seek to improve consumer access to accurate provider network information. The following are key findings:

  • An environment for shared accountability can be fostered through incentives, policy alignment, and enforcement of regulatory and contractual requirements.
  • Uniform data standards and accompanying guidance ensures that data are usable, especially when they come from disparate sources.
  • Provider directories should engage and inform consumers with diverse language needs and educational levels as they enroll in coverage and seek care.

Report: Employer-sponsored health plans hold steady

Most people who enrolled in a health insurance plan through an Affordable Care Act exchange were previously uninsured and were not employees of companies dropping health plans, according to new Census Bureau data. Fewer middle-income Americans took advantage of the marketplace than did people with low incomes, and the uninsured rate dropped by a higher percentage in states that expanded Medicaid eligibility, the data show. The New York Times (free-article access for SmartBrief readers) (9/16), Bloomberg (9/16)

Last Updated 06/29/2022

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