This study compared the difference in prices between private health plans and Medicare for 3,112 U.S. hospitals. On average, between 2016 and 2018, employers paid hospitals 240% of what Medicare pays for the same services at the same set of hospitals.
To illustrate the magnitude of price variation, RAND calculated relative prices at the 25th and 75th percentiles in each state. For employers included in this study, the difference between paying prices at the 75th percentile hospital versus the 25th percentile hospital within their state represents a 45 percent reduction in hospital spending.
Many employers are focused on strategies to reduce health care spending, but many rely on wellness and other programs designed to improve employee health and reduce health care utilization. Despite their promise and widespread adoption, wellness programs have not been shown to reduce spending or improve employee health. Employers would realize much larger savings if they instead place increased emphasis on the prices negotiated on their behalf.
This report was designed to reduce this information barrier for employers, but information cannot by itself lead to changes in prices. Moving patient volume to lower-priced hospitals that offer better value is an opportunity for employers, their employees, and society to reduce healthcare spending, and also helps the market to reward the most efficient hospitals. This process may require employers to think more judiciously about the prices that are being negotiated on their behalf, rather than outsourcing much of the work to brokers and TPAs. As illustrated in this report, there are large potential savings at stake.
Interactive Price Map (RAND 3.0)
Using data from 2016 through 2018, this interactive price map allows users to see the overall relative price metric from each hospital with sufficient claims in the RAND 3.0 study. This data was published in September, and is most useful now for historical comparison. For more up-to-date information, visit Sage Transparency.
Having problems? This map is hard to navigate with touchscreen and is therefore best viewed on your desktop.
UPDATED September 18, 2020
Employers, health plans, business coalitions, all-payer-claim-databases, and other organizations that have employer hospital claims databases are invited to enroll in RAND 5.0, the fifth in a series of Hospital Price Transparency Studies.