Nationwide Evaluation of Health Care Prices Paid by Private Health Plans: Findings from Round 3 of an Employer-Led Transparency Initiative
Published by the RAND Corporation in September 2020 as the third in the series of Employer Price Transparency Studies, the RAND 3.0 report revealed that a large sample of employers and private insurers across 49 states and District of Columbia pay, on average, 247% of what Medicare pays for the same hospital services, including both facility and professional fees for inpatient and outpatient care.
Researchers analyzed hospital claims data representing $33.8 billion from 2016-2018 for 3,112 hospitals located in every state except Maryland. They collected data from self-insured employers, six state all-payer claims databases, and health plans across the country. The findings illustrate a wide variation in hospital facility and professional prices for the commercially insured population. The report also identifies the top 10 most expensive health systems in each state and reports individual hospital prices alongside quality and safety measures.
Demographics
33.8
Billion dollars in hospital spending
3,112
Hospitals
49
States
Study Results: Commercial Prices Paid
Relative to Medicare Prices in 2018
231%
In-patient hospital average
(facility and professional fees)
Indiana average: 288%
267%
Out-patient hospital average
(facility and professional fees)
Indiana average: 315%
247%
In-patient & Out-patient hospital average (facility and professional fees)
Indiana average: 304%
Study Summary
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
Additional Resources
Dive deeper into the RAND 3.0 study with presentation materials from the 2020 National Hospital Price Transparency Conference.
Press Release
Read the press release from the RAND Corporation and Employers’ Forum of Indiana.
Slide Deck
View or use the RAND 3.0 slide decks from the 2020 National Hospital Price Transparency Conference.
All 2020 Conference Presentations
Browse all slide decks and videos from the 2020 National Hospital Price Transparency Conference.
Author
Christopher Whaley
Associate Professor in the Department of Health Services, Policy, and Practice, Brown University School of Public Health
Chris contributed to the RAND 2.0 study and took over as lead researcher for the RAND 3.0, RAND 4.0, and PT5 (RAND 5.0) studies. His research focuses on how information and financial incentives influence patient’s choice of providers, how providers respond to changes in consumer incentives, and insurance benefit design innovations. His research has been published in leading clinical, health policy, and economics journals, including Health Affairs, JAMA, the Journal of Health Economics, and the New England Journal of Medicine.
Brian Briscombe, Rose Kerber, Brenna O’Neill, and Aaron Kofner provided additional research for the RAND 3.0 study.
2017 – 2024
All Price Transparency Studies
See results and analysis for each of the Employer Price Transparency Studies, covering prices from 2013 to present. Each study is available, free of charge and in its entirety.
PT5.1 (RAND 5.1)
Updated Dec 2024
A study of hospital prices from hospitals and ambulatory surgery centers from across the nation plus price variability among physician administered medications, conducted by RAND.
RAND 4.0
Published May 2022
A study of hospital prices from more than 4,000 hospitals and 4,000 ambulatory surgical care centers from across the nation, conducted by RAND.
RAND 3.0
Published September 2020
A nationwide price study of more than 3,000 hospitals using employer claims, conducted by RAND.
RAND 2.0
Published May 2019
A study of more than $13 billion in hospital spending in 25 states, conducted by RAND.
RAND 1.0 (PILOT)
Published September 2017
The first Employer Price Transparency study, focused on providers in Indiana and conducted by RAND.
