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N.Y. hospitals’ prices determined by bargaining power from size, not quality

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Gorman Actuarial,  in a report, says that  the price that New York hospitals get depends on financial bargaining power, not quality.

The report says that hospitals with  the biggest bargaining muscle get paid 1.5 to 2.7 times more for care by insurers than do the the lowest-priced hospitals in the same market.

Gorman’s analysis, which uses data from 107 hospitals and nine insurers, says the prices don’t relate  to better or lesser quality.

The report, titled Why Are Hospital Prices Different? An Examination of New York Hospital Reimbursement, was funded in part by the New York State Health Foundation.

“This landmark report helps explain what is happening at the negotiating table between hospitals and insurance plans, and how it results in such wide price variation,” said David Sandman, CEO of NYSHealth.

Modern Healthcare noted: “The report identifies contract provisions between hospitals and insurers that can inhibit price transparency to the detriment of consumers who are paying more out-of-pocket for healthcare as high-deductible plans grow in popularity in the individual and employer markets.

“Some contract provisions prohibit the inclusion of hospital prices in cost-estimator tools available to consumers, the report noted. And anti-steering language may limit what insurers can tell patients ‘about high-quality, lower-priced providers,” the report said. This obviously helps hospitals maintain price advantages and curb competition.

Hospitals that are part of a hospital system with a large market share are usually higher-priced because of the system’s power in contract negotiations.

Modern Healthcare reported: “The report also does some myth-busting. One of the standard rationales used by hospitals to justify high commercial prices is that they are needed to offset high volumes of Medicare and Medicaid patients, which tend to get lower reimbursement.

“The study showed no correlations on that front. It found that hospitals in New York City and downstate that serve more Medicare and Medicaid patients tend to fetch lower prices in the private commercial market.”

To read the report, please hit this link.
To read Modern Healthcare’ analysis of it, please hit this link.

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