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Gloria Sachdev, President and CEO, Employers’ Forum of Indiana

This study examines hospital prices in Indiana and compares them to Medicare rates, providing valuable insights for employers and healthcare stakeholders.

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Gloria Sachdev, President and CEO, Employers’ Forum of Indiana

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  1. Findings From a National Employer-led Hospital Price Transparency Study Gloria Sachdev, President and CEO, Employers’ Forum of Indiana gloria@employersforumindiana.org Chapin White, Senior Policy Researcher, (adjunct) RAND Corp cwhite@rand.org • Rand 2.0 Authors: • Chapin White, Ph.D., Senior Policy Researcher, RAND Corp • Christopher Whaley, Ph.D., Policy Researcher, RAND Corp • Master Slide Deck for Public Use • Last updated 5-30-19 The contents represent the views of the authors and not the organization or it’s funders

  2. About the Employers’ Forum of Indiana

  3. Members of the Employers’ Forum of Indiana • Anthem Blue Cross and Blue Shield • AON • American Health Network • Assured Partners • Barnes and Thornburg • Castlight Health • Chrysler (FCA) • Columbus Regional Hospital • Community Health Network • Cummins Inc. • Deaconess Hospital • Eli Lilly and Company • Encore Health • Eskenazi Health • Fort Wayne Community School Corp • Franciscan Alliance • Gregory & Appel • Healthcare Options • Indiana Farm Bureau • Indiana State Teachers Union • Indiana Health Information Exchange • Indiana Rural Health Association • Indiana University • Indiana University Health • Ivy Tech • JA Benefits • LHD Benefit Advisors • Mercer • Merck (affiliate) • Monarch Beverage • Northwest Radiology • OneAmerica • OneBridge • Ortho Indy • Our Health Inc. • Parkview Health • Purdue University • Roman Catholic Archdiocese of Indianapolis • Roche & Genentech • St. Vincent Health • State of Indiana • Suburban Health Organization • The Henriott Group • Tippecanoe School Corp. • TrueRx • United Healthcare • Young at Heart Pharmacy

  4. QUESTIONS the Forum Aimed to Answer • Part A: • -Are hospital prices high in Indiana? • -How do prices compare among our hospitals? • -Where can we find good value? • -What is our trend?Part B: • -How do our prices compare to those in other states?

  5. Partnership between the Employers’ Forum of Indiana and RAND

  6. BACKGROUND Study funded by the National Institute for Health Care Reform (NIHCR), using claims data from automakers and UAW Source: White, C., Bond, A. M., & Reschovsky, J. D. (2013). High and Varying Prices for Privately Insured Patients Underscore Hospital Market Power (No. 27). Retrieved from http://nihcr.org/wp-content/uploads/2015/03/HSC_Research_Brief_No._27.pdf.

  7. The Problem: Employer premiums have risen, and so have employee contributions. *Estimate is statistically different from estimates for the previous year shown (p<.05). SOURCE: KFF Employer Health Benefits Survey, 2018; Kaiser/HRET Survey of Employer-Sponsored Health Benefits. 1999-2017

  8. Use trending back to baseline. Use trending back to baseline. Health Care Cost Institute. (2018). 2016 Health Care Cost and Utilization Report. Retrieved from http://www.healthcostinstitute.org/report/2016-health-care-cost-utilization-report/. Prices are from Appendix Table A3,, utilization and intensity is estimated by dividing spending (from Appendix Table A1) by prices.

  9. Question-Part A: Are Hospital Prices High In Indiana?Price Transparency Analysis

  10. The Rationale For Using Medicare to Level Set All Commercial Hospital Payments

  11. Rand 1.0 Employer Hospital Price Study: INDIANA ONLY • Study was funded by RWJF and RAND Corpwas contracted to do the study analyses • Study time period was July 2013 to June 2016 • ~225,000 covered lives in Indiana • 120 community hospitals in Indiana • All hospital inpatient and outpatient services • Total paid claims was $695 million • Full report of study findings: freely downloadable from RAND’s website: https://www.rand.org/pubs/research_reports/RR2106.html

  12. RAND Study 1.0 Study FindingsIndiana Commercial Hospital Allowable Prices Paid as a Percent of What Medicare Would Have Paid for the Same Services 272% 358% 217% Source: White, 2017, Hospital Prices in Indiana.

  13. RAND 1.0 Study FindingsRelative Prices are Trending Up Away From Medicare Source: White, 2017, Hospital Prices in Indiana.

  14. Question, Part B: HOW DO INDIANA HOSPITAL PRICES COMPARE TO OTHER STATES?

  15. RAND 2.0 National Hospital Price Transparency FindingsOfficial Study Title: Prices Paid To Hospitals By Private Health Plans Are High Relative To Medicare And Vary Widely-Findings From An Employer-led Transparency Initiativeauthored by Chapin White and Christopher Whaley, RAND Corporation

  16. RAND 2.0 Study was Published on May 9, 2019

  17. Our Study Made National & Local News…over 30 News Outlets, including: • Many Hospitals Charge Double or Even Triple What Medicare Would PayThe New York Times, May 9, 2019 • Study: Employers Pay 240% More Than Medicare For Hospital CareForbes, May 9, 2019 • What Employers Pay Hospitals Varies Widely, Study FindsWall Street Journal, May 9, 2019 • Employer Health Plans Pay Hospitals 241% of What Medicare Would Pay Modern Healthcare, May 9, 2019 • Private Insurers Paid Hospital 241% of what Medicare Would HaveHealthLeaders, May 9, 2019 • Private Plans Pay Hospital Prices 241% Higher Than Medicare, RAND FindsAJMC, May 9, 2019 • Private Insurers Pay Hospitals 2.4 Times What Medicare PaysBecker’s Hospital Review, May 9, 2019 • Market Muscle: Study Uncovers Differences Between Medicare And Private InsurersKaiser Health News, May 9, 2019 • Study: Indiana hospitals charge private health plans 311% of what Medicare would payIndianapolis Business Journal, May 9, 2019

  18. Interactive Map of US Hospital Pricesemployerptp.org

  19. RAND 2.0 SUPPLEMENTAL STUDY DATABASE FREELY AVAILABLE Supplemental Information, Table 1 Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative. Line of service information for inpatient and outpatient services in tables 4 and 5

  20. RAND 2.0 National Hospital Price Study of 25 statesConducted by RAND, commissioned by Employers’ Forum of Indiana Source: White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  21. Our Approach -Optional for employers

  22. Two Ways Hospital Prices are Measured adjusted for • casemix • local wages • teaching • uncompensated care comparable across service lines • “Relative prices” • “Price per casemix weight” adjusted for • casemix not comparable across service lines

  23. Across 25 States: Employer Health Plans Pay Hospitals 241% of What Medicare Would Pay and Overall Trend in Increasing Source: White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  24. Commercial Relative Price TREND Varies at the State Level: Comparison of 5 States Source: White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  25. Across 25 States: Average Relative Hospital Prices, 2017 Percent Employer Health Plans Pay Hospitals Relative to What Medicare Would Pay Source: White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  26. Indiana: TOTAL Hospital Commercial Prices Relative to Medicare, 2017(inpatient plus outpatient) 311% ** RAND 2.0 Study period (2015-2017) averages as study does not provide 2017 relative prices for these two hospitals only Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  27. Indiana: INPATIENT Commercial Prices Relative to Medicare, 2017 236% ** RAND 2.0 Study period (2015-2017) averages as study does not provide 2017 relative prices for these two hospitals only Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  28. Indiana: OUTPATIENT Commercial Prices Relative to Medicare, 2017 403% ** RAND 2.0 Study period (2015-2017) averages as study does not provide 2017 relative prices for these two hospitals only Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  29. Single Health-System: Indiana vs. MichiganTOTAL Relative Inpatient plus Outpatient Prices 2017 Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  30. Indiana Health Systems TREND of Total Commercial Prices relative to Medicare Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  31. Our Goal is to Improve Value, Where Value Includes Cost and Quality BEST Value = High Quality Cost where Cost = Price x Quantity

  32. QUALITY: CMS CREATED Publicly available Hospital Compare website meant for consumers

  33. Quality: CMS Hospital Comparemedicare.Gov 1. Heart attack 2. Heart failure 3. Heart bypass 4. Pneumonia 5. Chronic Obstructive Pulmonary Disease 6. Total knee/hip replacement

  34. Best Quality Using CMS Hospital Star Ratings and BEST PRICE Using RAND 2.0 Study Findings: Across 25 States GOAL! < 150% 150-250% > 250% Source: White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  35. Takeaway #1: Price transparency is the new normal…Hospital Shopping Should be a Team Sport

  36. Takeaway #2: Markets Need Information, Buyers Need Options • “Chaos behind a veil of secrecy” (Uwe Reinhardt) • “Where there’s mystery there’s margin” • We urgently need transparency in both cost and quality: • Prices vary significantly by state • Prices vary even more so among hospitals within states • Outpatient prices are more variable than inpatient prices and consume a greater share of the employer’s dollar • The devil is in the details: you need cost and quality information at the level of the individual provider

  37. Takeaway #3: Commercial Payment Models Do Not Need to be So Complex

  38. Takeaway #4: There are Numerous Strategies Available to Drive Value

  39. Thank you!For The Most Current Information Including Enrolling In RAND 3.0 Study, Please Visit www.employerPTP.org

  40. Extra Slides to be shared if helpful

  41. MICHIGAN Hospital Systems:Relative Prices (2017) and Operating Margins (2015-17) Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative • Profit Margin information obtained fromwww.hospitaldatasets.org ( : Relative prices are from Operating margins are calculated from Medicare hospital cost report data downloaded

  42. MICHIGAN: There Are Good, Moderately Priced HospitalsBest Quality Using CMS Hospital Star Ratings and BEST PRICE Using RAND 2.0 Study Findings Price Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative CMS Star Ratings: https://data.medicare.gov/data/hospital-compare

  43. COLORADO: TOTAL Hospital Commercial Prices Relative to Medicare, 2017(inpatient plus outpatient) Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  44. COLORADO: INPATIENT Commercial Prices Relative to Medicare, 2017 Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  45. COLORADO: OUTPATIENT Commercial Prices Relative to Medicare, 2017 Source: Derived from Supplement, White, 2019, Prices Paid to Hospitals by Private Health Plans are High Relative to Medicare and Vary Widely-Findings from an Employer-Led Transparency Initiative

  46. Private Claims Volume in RAND 2.0 Study • Colorado > $ 5 Billion • Michigan > $ 1 Billion • Indiana > $1 Billion • Pennsylvania < $12 million – thus no hospital-specific breakdowns possible • There’s a wealth of information when sufficient claims are available for analysis. Volume of Claims per State is Important

  47. Comments from American Hospital Association (AHA) • Medicare payment covers 87% of hospital cost • Medicare Payment Advisory Commission (MedPAC) says hospitals are not efficient because commercial payment is so high that hospitals do not have the incentives to be efficient. • 1.0/0.87 = 115% of Medicare is breakeven on hospital costs so paying a bit more is reasonable. https://www.aha.org/news/headline/2019-05-09-aha-responds-rand-study-prices-paid-hospitals-private-health-plans MedPAC report, Marc 2019 http://www.medpac.gov/-documents-/reports

  48. So why are most hospitals… Losing Money on Medicare?” “Strong market power leads hospitals to reap higher revenues from private payers. This in turn leads these hospitals to have weaker cost controls. The weaker cost controls lead to higher costs per unit of service. As a result, hospitals have a narrower margin on their Medicare business.” Jeffrey Stensland, PhD Sr. Principal Policy Analyst Medicare Payment Advisory Committee

  49. “Twenty years of wage stagnation on the middle class has been 95% caused by exploding healthcare costs.” - WSJ The Health Market Place: Providing a Failing Value-Proposition National Price Transparency Conference

  50. Edging Out Salary Growth & Economic Development National Price Transparency Conference

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