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Providers, hospitals paid more by private insurers: Study

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Hospital and physician payment rates vary widely across the United States, with some hospitals commanding almost five times what Medicare pays for inpatient services and more than seven times what Medicare pays for outpatient care, according to research released Thursday.

Average inpatient hospital payment rates paid by four national insurers ranged from 147% of the Medicare rate in Miami to 210% of the Medicare rate in San Francisco, according to a research brief by the Washington-based Center for Studying Health System Change that was commissioned by a large-employer group.

Average payment rates for hospital outpatient services generally were higher than those for inpatient services, which HSC researchers said they found “somewhat unexpected” because hospitals face some competition from free-standing facilities, such as ambulatory surgical centers, imaging centers and physician offices.

HSC President Paul B. Ginsburg, an economist and author of the study, said expansions of coverage and reductions in Medicare and Medicaid due to the Patient Protection and Affordable Care Act could lead to even higher private insurer payment rates to hospitals and doctors.

“Hospitals acknowledged that private insurance rates were rising more rapidly than their costs but attributed the spread to increasingly constrained Medicare and Medicaid payment rates,” Mr. Ginsburg wrote.

Suzanne Delbanco, executive director of Catalyst for Payment Reform, a San Francisco-based employer-led group that commissioned the study, said in a statement that the study “confirms that many hospitals use their market power to get exorbitantly high private payment rates. Employers are very concerned about how this situation contributes to the unsustainable rise in health care costs and are looking into payment reforms that can improve the quality and cost-effectiveness of care.”

The study had two major recommendations: Redesigning benefits to give patients more incentive to choose lower-cost providers and an unspecified regulatory approach to cap provider charges, neither of which would be politically popular and would require “hard choices and trade-offs,” according to the study.

The study examined private insurer payments for inpatient and outpatient services of four national insurers—Aetna Inc., Anthem Inc., CIGNA Corp. and UnitedHealth Group Inc. —in eight markets—Cleveland; Indianapolis; Los Angeles; Miami; Milwaukee; Richmond, Va.; San Francisco; and rural Wisconsin.

“Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power,” is available at www.hschange.com/CONTENT/1162/.