A new multi-state report by the RAND Corporation places Colorado 20th out of 25 states for highest relative commercial health care prices compared to Medicare. The analysis indicates that across the 25 states participating, prices paid to hospitals by private insurers in 2017 averaged 241% of what Medicare would have paid. Colorado is on the high-end of the spectrum with relative prices across both inpatient and outpatient services paid at 269% of Medicare. Outpatient services average 350% of Medicare in Colorado while inpatient services average 220% of Medicare.
The analysis includes claims for more than four million people and over 1,500 hospitals, 77 of which are Colorado hospitals. Information for the study came from two state all payer claims databases, including the Colorado All Payer Claims Database (CO APCD), self-insured employers, and records from health insurance plans who participated voluntarily. The breadth of hospital pricing makes the study unique and shines new light on ways to contain health care costs.
According to the RAND study authors, “If employers and health plans participating in the study had paid hospitals using Medicare’s payment formulas, total payments over the 2015-2017 period would have been reduced by $7 billion — a decline of more than 50%.”
More detailed relative price information is available by named hospital and hospital system in a supplemental data file provided by RAND. At the system level, Colorado hospital prices ranged from 170-454% of Medicare in 2017 for outpatient services, and 125-266% of Medicare for inpatient services. Critical Access Hospitals were on the low end of relative system payments for both inpatient and outpatient services, while HCA Healthcare had the highest outpatient and Catholic Health Initiatives had the highest inpatient relative payments across systems in Colorado in 2017.
“Health care costs across the nation are unsustainable and this study provides concrete ways to control costs,” says CIVHC CEO and President, Ana English. “This is valuable information for employers, policymakers and other purchasers of health care services to use as a potential starting point for negotiation.”
The report, “Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative,” was a collaboration between RAND and the Employer’s Forum of Indiana, an employer-led health care coalition. CIVHC partnered with RAND to provide a CO APCD data extract enabling analysis of commercial payments made in the Colorado hospital market.
Other states included in the analysis are Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maine, Michigan, Missouri, Montana, North Carolina, New Hampshire, New Mexico, New York, Ohio, Pennsylvania, Tennessee, Texas, Vermont, Washington, Wisconsin and Wyoming.
Support for the study was provided by the Robert Wood Johnson Foundation, the National Institute for Health Care Reform, the Health Foundation of Greater Indianapolis and participating employers.