The Relationships Among Cash Prices, Negotiated Rates, And Chargemaster Prices For Shoppable Hospital Services

Do Insurers With Greater Market Power Negotiate Consistently Lower Prices for Hospital Care? Evidence From Hospital Price Transparency Data

“…Prior studies found that hospitals may offer lower prices for cash-pay patients, compared to the median insurer-negotiated rates across all plans, in response to their lower willingness (and ability) to pay, especially in lower-income communities (Henderson & Mouslim, 2022; Wang, Meiselbach, et al, 2023). We found that cash prices were typically lower than (or the same as) insurers’ prices (except the largest insurers’) for ER visits, evaluation and management, and medical and surgical services, consistent with this evidence.…”

“…As insurers’ market power weakened, we hypothesized that price discounts, relative to nonmajor insurers with the least negotiating leverage, would diminish. We further hypothesized that cash-pay patients may pay even higher prices since they have virtually no market power, unless other factors influence a hospital’s cash-pay pricing mechanism (Wang, Meiselbach, et al, 2023). We used the MSA-level insurer market share information from the AMA report as a proxy measure for the largest and second largest insurers for each hospital located in the corresponding MSA, the geographic unit that is commonly used to define the health insurance market (Eisenberg et al, 2021; Fulton, 2017).…”

“…However, these studies might not be necessarily generalizable to the entire US health insurance market given that they have primarily used a limited sample of insurers and/or markets (e.g., three insurers from an administrative claims database, all-payer claims database for a single state), or have examined a limited set of (mostly inpatient) procedures. Moreover, prior studies were unable to incorporate cash prices, which may determine the out-of-pocket (OOP) cost for uninsured patients and insured patients choosing to pay the full price OOP (e.g., patients enrolled in high deductible plans before reaching their deductible) (Wang, Meiselbach, et al, 2023).…”

“…In these plans, insurers only administer claims without bearing any risk, which may diminish their incentive to negotiate lower prices on behalf of employers, and there is no evidence that, on average, risk-bearing employers were able to effectively negotiate lower prices themselves (Craig et al, 2021; Eisenberg et al, 2021). In addition, a recent study found that cash prices, paid by individual patients with virtually no market power, are cheaper than the median commercial negotiated rate 47% of time for shoppable services (Wang, Meiselbach, et al, 2023). Collectively, these findings raise concerns as to whether insurers are still effectively leveraging their bargaining power to negotiate lower rates for their beneficiaries.…”

Hospital Prices in Medicaid Managed Care

“…This cross-sectional study obtained data on MMC outpatient hospital prices from Turquoise Health (as of July 3, 2023), which compiles prices reported by hospitals complying with the Hospital Price Transparency rule . We included 30 shoppable services, as defined by the Centers for Medicare & Medicaid Services, and emergency department (ED) visits that were paid by Medicare through the Outpatient Prospective Payment System.…”