The KHC’s three main organizational strategies are to improve healthcare quality, make healthcare more affordable, and build equitable healthcare communities. As an organization, we have long understood that transparency of information is critical to achieving those strategies.
One aspect of transparency relates to hospital costs. This month the KHC hosted a webinar diving into RAND 4.0, the fourth in a series of Hospital Price Transparency Studies focused on claims data, with this study reviewing claims from 2018 to 2020. The study found nationally that hospitals, on average, are charging employers almost three times what they are charging for the same services under Medicare. In Kentucky, the average is 212%.
Prices paid to hospitals during 2020 by employers and private insurers for both inpatient and outpatient services averaged 224% of what Medicare would have paid, with wide variation in prices among states, according to the RAND Corporation report. The study contained information from more than 4,000 hospitals in 49 states and Washington, D.C.
The report shows prices as a percent of what Medicare would have paid for the same services at the same hospital, thus making these relative prices comparable across the country. Because Medicare methods adjust for factors such as casemix and local wages, we are able to compare relative prices between states, hospital systems, etc. These methods are empirically based and they’re transparent, meaning that for the study, the researchers are able to recreate that to simulate what Medicare would have paid for those services.
The study and supplemental data files are available on the RAND website for download, and the KHC team has spent the last several weeks examining the results of the study and what it tells us about hospital prices in the Kentucky and Southern Indiana region.
HIGHLIGHTS OF RAND 4.0 FOR KENTUCKY AND SOUTHERN INDIANA
Of the 49 states and Washington, D.C. in the study, Kentucky ranked 12th lowest in overall commercial price relative to Medicare at 212% in 2020, compared to the national rate of 224%. Kentucky’s inpatient prices were 206% of Medicare and outpatient prices were 243%. There were 85 facilities in Kentucky included in the study.
While the overall relative price is lower than the national rate, there is variation among hospitals in Kentucky and Southern Indiana. Overall relative prices range from 88% to 286% in the Commonwealth, and even within the same cities, there is large variation in the prices paid for services. For example, a CT or MRI in Louisville is anywhere from 158% of Medicare to 318% of Medicare. And if you live in Northern Kentucky, you might find cheaper prices across the river in Cincinnati.
For the first time in the history of the RAND Transparency Studies, outpatient relative prices in the Commonwealth are higher than the national rate. Outpatient prices in Kentucky were 241% compared to the national rate of 234%. Kentucky’s outpatient price is still lower than most of its bordering states, with the exception of Tennessee to the south.
Similar to what the study shows nationally, there is little to no relationship between cost and quality of care in Kentucky. Quality is measured using the CMS Hospital Quality Star Ratings. As highlighted in RAND 3.0, Kentucky’s hospitals lag in quality in comparison to the rest of the nation. Fewer Kentucky hospitals in the study have above average or excellent CMS Hospital Quality Star Ratings than the rest of the country.
The RAND Study also now includes information on ambulatory surgery centers (ASCs). Prices relative to Medicare for outpatient services in ASCs are lower than outpatient services provided in hospital-based outpatient departments. Although there is not much detailed data available for Kentucky, at a high level, the Commonwealth mirrors this national trend.
REVISIT THE WEBINAR AND FIND OUT MORE
Above are just a few of the highlights of the latest RAND Hospital Price Transparency Report. If you missed the webinar or want to revisit the more detailed analyses that were discussed, you can watch the recording and access the slides here.
The RAND Study is just one slice of the healthcare cost and quality pie. The KHC’s December Community Health Forum on December 6 will continue the discussion and more comprehensively explore all things healthcare transparency. Registration is free and can be found here.
RAND is currently recruiting employers, health plans, and state all payer claims databases to participate in round 5 of the Hospital Price Transparency Studies. If you or your organization are interested, use the form on the RAND website to express your interest.