Becker's Hospital Review

Finance, Revenue Cycle & ICD-10 50 Study: Highest-Priced Hospitals Have Charges Up to 60% Higher Than Competitors By Bob Herman T he highest-priced hospitals within a market often have charges that are 60 percent higher than the lowest-priced market competitor, and the high-priced hospitals often wield an immense amount of influence in their areas, according to a study from the Center for Studying Health System Change. Researchers looked at hospital claims data for more than 590,000 active and retired nonelderly autoworkers and their dependents in 13 U.S. metropolitan areas. The study, which the authors said is one of the first to look at individual hospital prices within markets, found that inpatient and outpatient charges varied widely within the same markets. The average gap between the highest- and lowest-priced hospitals in each of the 13 metro areas for inpatient care was 60 percent, and for outpatient care, the average gap ballooned to 100 percent. In every market, hospitals commanded higher pay from commercial payers compared with Medicare, but some markets charged more than others. For example, inpatient hospital care in Youngstown, Ohio, cost about 25 percent more than standard Medicare rates, but in Kansas City, Mo., charges were more than double Medicare rates. Outpatient hospital care in Indianapolis and Kokomo, Ind., was more than three times higher than what Medicare pays, and eight of the 13 markets studied charged at least double Medicare's rates for outpatient care. The study also looked at physician prices. Researchers found primary care prices were on par with Medicare's rates — and even below Medicare in some markets — because primary care physicians tend to practice in solo or small groups. However, specialty physician prices were higher than primary care prices: Some specialty physicians were reimbursed 50 percent more than others within the same market because their practices are larger and more concentrated. The authors concluded that the high price variation among providers within the same market is due to negotiating leverage. Hospitals are often in the most advantageous position, especially "must-have" hospitals that have name recogni- tion and good locations, because they provide large volumes of care. According to the study, private insurers know that if big systems, "musthave" hospitals and large specialty groups are not in their health plans, employers won't stick with them anymore. "The dramatic variation in prices from one hospital to another points to the significant market power of certain hospitals to command high prices, even in markets with a dominant insurer," said Chapin White, PhD, an HSC senior researcher and co-author of the study. HSC's results build on a similar study it released in February 2012. In that report, researchers found differences in hospital prices play a large role in healthcare spending variation in different regions. A May 2012 Health Affairs study, which also included HSC researchers, similarly said that the largest hospitals are using their negotiating clout to obtain high commercial reimbursements, and this trend will only continue as consolidation runs rampant throughout the healthcare industry. n CMS Issues Final Rule Cutting $1.1B in Medicaid DSH Payments By Bob Herman C MS has issued a final rule on Medicaid disproportionate share hospital payments, cutting roughly $1.1 billion from the program over the next two fiscal years. Under the Patient Protection and Affordable Care Act, Medicaid DSH payments to hospitals will be cut by $18.1 billion from fiscal year 2014 to FY 2020. Medicaid DSH payments go to safety-net hospitals and health systems that treat high volumes of low-income populations. The Medicaid DSH cuts were put into the law because Medicaid expansion and the health insurance exchanges are expected to reduce uncompensated care levels at hospitals. In the federal government's 2014 fiscal year, which started Oct. 1, hospitals will lose $500 million in Medicaid DSH payments, CMS officials said. Those cuts will increase to $600 million in 2015. The final rule only covers Medicaid DSH payments for those two years. CMS also outlined its methodology on how it would carry out the reductions. Several factors will be taken into account for hospitals losing DSH funds: For example, states with the lowest percentages of uninsured people will receive larger reductions. States that do not target their DSH payments toward hospitals with the highest volumes of Medicaid patients and the highest levels of uncompensated care will receive larger reductions. CMS' formula for DSH cuts is similar to its proposed rule from May. Many states have said they will not expand Medicaid under the PPACA, and safety-net hospitals in states declining Medicaid expansion are in precarious situations, as they are expected to simultaneously lose Medicaid DSH funds and not see gains from added Medicaid rolls. President Obama and others have attempted to delay the Medicaid DSH payment cuts until 2015. Rep. John Lewis (D-Ga.) proposed delayed DSH payment cuts this past May, but Congress has not taken any action on the legislation. HHS and CMS officials said their hands were tied, and they had to issue the final rule, per the law's mandate. "In the absence of a legislative change, the aggregate reductions in federal DSH funding will begin with FY 2014 as required by current law," according to the final rule. "HHS has no flexibility to institute a delay of the DSH allotment reductions without congressional action." n

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