Large employers in Indiana must examine their healthcare contracts and consider other options for care, according to a new RAND Corp. study whose findings suggest prices the state's employers pay for hospital care well exceed national norms and continue to rise relative to what Medicare pays for the same services.
Prices varied widely among groups of hospitals and hospital systems, from less than two times the rate Medicare pays for the same services to more than 3.5 times what Medicare pays, results showed. Outpatient care in Indiana averaged 3.5 times what Medicare would have paid.
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The Employers' Forum of Indiana asked RAND to analyze insurance claims data for insight into the prices employers pay to hospitals. The study calculated the average prices paid for hospital services in Indiana by analyzing insurance claims data provided by a group of employers that chose to participate in the study. Participating employers provide coverage to 225,000 people, about 7 percent of the Indiana population with employer-sponsored health coverage. The study is based on claims for services provided from July 2013 through June 2016.
"The goal was to provide information to help employers become better-informed purchasers of health care and stronger advocates on behalf of their employees," RAND said.
The study showed over the course of the three-year period, relative prices rose with especially sharp increases for Parkview Health and Community Health Network. Parkview Health System also had the highest prices at 3.7 times the rate paid by Medicare, with Deaconess Health System at the low end with prices at 1.2 times the Medicare rate.
The overall average price for inpatient hospital care in Indiana was 2.17 times the Medicare rate.
What's more, participating employers had limited information about the prices they pay hospitals for their workers' health care, limiting their ability to negotiate.
The report suggests employers no longer consent to agreements where they pay a discount of the charges billed by hospitals, since doing so can encourage hospitals to increase charges.
"A better approach is to contract with hospitals to pay a prospectively determined amount for each procedure, which could be accomplished by paying a fixed multiple of the prices set by Medicare," the study said.
They also may want to steer toward benefit design, moving patients away from pricier hospitals and health systems toward lower-priced providers.
"Employers play a key role in the U.S. health care system, but to be smart shoppers they need solid information on the care they are buying and the prices they are paying," White said. "Alternative payment models, like shared savings or bundling, get a lot of attention. But this study shows that we also need to focus on the basics, and do more to rationalize prices in existing fee-for-service payment systems."
Twitter: @BethJSanborn
Email the writer: beth.sandborn@himssmedia.com