WASHINGTON – September 8, 2022 – To support employers and other healthcare purchasers in efforts to stop paying indefensible hospital prices, the National Alliance of Healthcare Purchaser Coalitions (National Alliance) released a new resource for plan sponsors to map out strategies to identify and negotiate fair market prices for hospitals.
Recent data indicates that for most hospitals a “fair price” for patients privately insured by employers is 140%-200% of what Medicare pays for the exact same products, procedures and services at the exact same facilities. Some hospitals charge 250% more for those services, with others even higher at 500% or more over Medicare. A fair price should allow for a reasonable markup from costs and a price that is competitive with peer hospitals.
“For the first time, we finally have data that reinforces what we’ve long known – hospitals prices are out of control – and we can’t rely on health systems and health plans to course correct,” said Michael Thompson, National Alliance president and CEO. “Employers not only have the right, but a responsibility as plan fiduciaries, to negotiate fair prices. Now is the time for honest discourse and action on what is reasonable to pay for services provided.”
Age of transparency
The playbook, “Beyond Hospital Transparency: Getting to Fair Price,” helps purchasers navigate and understand how to best leverage newly available hospital price and quality transparency data and tools from Sage Transparency which incorporates content from RAND Corporation, the National Academy for State Health Policy (NASHP), and other sources. It also offers guidance on rights and responsibilities as plan sponsor fiduciaries to determine fair prices for hospital services, market- and policy-based strategies, and ways to work individually and through coalitions to achieve fair pricing for hospital services.
While there isn’t a one-size-fits-all approach as available data and market conditions vary among regions and states, the methodology and action steps in the playbook to help plan sponsors determine and achieve a fair price include:
- Identify breakeven costs – Uncover what hospitals need to charge commercial customers to break even considering all other incomes and expenses plus a reasonable margin.
- Compare costs among peer hospital systems – Determine how hospital charges compare to other hospitals with similar services and quality.
- Determine a fair market price – Use data from Sage Transparency to negotiate fees based on a reasonable markup of hospital costs.
The playbook also includes an overview of the Consolidated Appropriations Act and debunks many of the inaccuracies around hospital pricing with a comprehensive resource – “Myths and Facts: Revealing Hospital Price Transparency Truths.”
“While there is much to fix in our nation’s healthcare system, one of the greatest offenders is hospitals that are overcharging and realizing huge profit margins at the expense of employers, their employees and families,” Thompson added. “Regional coalitions and their employer-purchaser members are playing a key role in driving and leveraging transparency data to get to a fair price and overcome the imbalance of power.”
The National Alliance gratefully acknowledges Arnold Ventures for grant support for its hospital price transparency initiative and Employers’ Forum of Indiana for developing and offering access to Sage Transparency.
About National Alliance of Healthcare Purchaser Coalitions
The National Alliance of Healthcare Purchaser Coalitions (National Alliance) is the only nonprofit, purchaser-led organization with a national and regional structure dedicated to driving health and healthcare value across the country. Its members represent private and public sector, nonprofit, and Taft-Hartley organizations, and more than 45 million Americans, spending over $300 billion annually on healthcare. To learn more, visit nationalalliancehealth.org and connect with us on Twitter and LinkedIn.
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