PA Employers Pay Hospitals 254% of what Medicare Would Pay and 120% more than Required to Breakeven per RAND and NASHP Data

May 24, 2022 – In PA, the prices paid to hospitals for privately insured patients by employers averaged 254% of what Medicare pays, an estimated 120% more than hospitals’ breakeven point – the amount a commercial health plan would need to reimburse a hospital to cover its expenses. PBGH, released these findings for PA based on the RAND Corporation study issued earlier this month and recently released data from the National Academy for State Health Policy (NASHP). 

The RAND Hospital Price Transparency Study examined claims data from employers, private insurers, and 11 state all-payer claims databases for more than 4,000 hospitals and 4,000 additional ambulatory surgical centers across 49 states and the District of Columbia. It found that hospitals, on average, are charging employers almost three times what they are charging for the same services under Medicare. An independent analysis released by NASHP last month found hospitals, on average, require only 127% of Medicare to breakeven. 

“It’s no secret employers and employees have been paying more than what is reasonable for care – often with no impact on quality,” said Jessica Brooks, president and CEO, Pittsburgh Business Group on Health.

The RAND and NASHP data, along with statistics from the Center for Medicare and Medicaid Services Turquoise Health and Healthcare Bluebook, are now available in the Sage Transparency dashboard. The first-of-its-kind tool was developed by the Employers’ Forum of Indiana and brings together public and proprietary data on hospital pricing and quality. Results from the dashboard on 70 hospitals in the state of PA: 

“We’ve finally accessed the black box for hospital performance, and it reveals wide variation in prices, quality and often unjustifiable margins among hospitals,” said Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions. “Employers must act quickly and decisively to use this information to exert pressure on their health plans and hospitals to negotiate contracts and networks, and with legislators to drive policy changes.” 

A playbook to assist coalitions, employers and other purchasers to act on this new price information in keeping with their fiduciary responsibility will be released shortly by the National Alliance. 

Provided by National Alliance of Healthcare Purchaser Coalitions

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