Variations in healthcare prices don’t reflect quality

It is widely known that healthcare prices for services vary widely across geographic regions and by provider type, but it is unlikely cost differences reflect quality of care. Within the same metro area, the price of some common health services can vary up to 39-fold, while services can differ 25-fold across areas, according to the latest issue brief from the Health Care Cost Institute (HCCI).

The April volume of the Healthy Marketplace Index measured the negotiated rates between hospitals and health insurance companies to report the prices of six commonly-used services within employer-sponsored plans across metro areas.

For example, some new patient office visits cost over three times more ($266) than others ($87) in the Minneapolis-St. Paul-Bloomington, Minnesota, metro area, which has a median price of $229 for the service. In Allentown-Bethlehem-Easton, Pennsylvania, where the median price of a screening mammogram is $177, the cost of the service could vary 4-fold across.

The latest findings come at a time when HHS is seeking input from industry stakeholders on requiring hospitals to publish their negotiated rates. HCCI’s findings revealed price variations for services are not consistent geographically or within categories of service.

“Most Americans would likely find it baffling that negotiated rates can be four to five times more for the exact same service in the same area,” Niall Brennan, president and CEO of HCCI, said in a statement. “Economists agree that while employers pay bills for commercial insurance, ultimately the burden falls on consumers themselves.”

To moderate the variations of especially high and low prices, HCCI analyzed the middle 80% of the distribution of services. Still, the findings were “striking.”

The median price of a common blood test in Toledo, Ohio, was $18, compared to $443 for the same test in Beaumont, Texas––a nearly 25-fold difference, according to the analysis.

“It is highly unlikely that these pricing differences are related in any meaningful way to differences in quality or value,” Brennan said. “Employers should be outraged that they and their employees may be paying radically different prices based on factors like which provider they go to.”

See the full issue briefing here.