Health insurance companies may be overpaying for common radiology services, according to a study published in raysJournal of the Radiological Society of North America (RSNA).
Many commercial plans leave money on the table when negotiating rates with hospitals, especially for expensive CT and MRI scans. The higher prices that commercial schemes pay eventually come back to affect American employers and workers through high premiums and out-of-pocket costs.”
Ge Bai, Ph.D., CPA, study co-author, Professor of Accounting, Johns Hopkins Carey School of Business in Baltimore, Md.
Hospitals generally contract multiple insurance plans, some of which are managed by the same insurance company. The study found that insurance companies negotiated different rates for the same services within the same hospital and even negotiated different rates across different health plans that they self-administer. Services that use high-cost equipment, such as computed tomography and magnetic resonance imaging, have wide variations and higher prices for Medicare services than for other radiology services.
The researchers studied commercial negotiated prices (not list prices or fees) from private payers for the 13 shoppable radiology services identified by the US Centers for Medicare and Medicaid Services (CMS).
On average, the maximum negotiated price for shopable radiology services was 3.8 times the minimum negotiated price at the same hospital and 1.2 times in the same pair between hospital, insurance and company.
CT and MRI services had wider price gaps within the hospital, within the insurance group, and the hospital as well as higher prices for Medicare when compared to other radiology services. The largest price gaps were found on brain CT scans, with 25% of hospital-insurance-company pairs having the maximum negotiated price more than 2.4 times the minimum negotiated price.
“Commercial prices for CT scans and MRIs ranged on average four to five times higher within the same hospital and up to nine to ten times higher in a quarter of hospitals,” said Dr. Bai. “Even within the same hospital and within the same insurance company, price variance can be five to six times greater across different plans,” she added.
The Hospital Pricing Transparency Rule requires US hospitals to disclose pricing information.
Previous research involving price transparency has found widely varying commercial prices for radiology services that can be shopped across hospitals.
“Price transparency has taken the blindfold off the eyes of business payers, forcing them to realize the fact that they are often paying too much,” said Dr. “By providing them with pricing information, radiologists can change the landscape of care delivery to benefit patients and payers.”
Insurers are increasingly negotiating rates based on percentage Medicare rates to improve price fairness and understandability. Study results suggest, however, that some health plans have negotiated rates less efficiently than others, including those operated by the same insurance company.
The study also found that higher prices (relative to Medicare) for more expensive services meant higher hospital profitability. This could incentivize hospitals to direct investments away from low-cost to high-cost imaging regardless of the additional clinical value. As a result, these moves may lead to ineffective spending for both patients and payers.
“Radiologists are in the best position to identify and provide appropriate and cost-effective clinical care to patients,” Dr. Bai noted.
The researchers suggest that price changes in the commercial market create an opportunity for radiologists to provide high-quality, low-cost care in non-hospital settings to benefit patients and commercial payers.
Study co-author Howard B. Foreman, MBA and MBA, Professor of Radiology and Biomedical Imaging at Yale University, in New Haven, Connecticut: “Radiology practices have an obligation to make imaging costs affordable for our patients.” “We can either be part of the problem of rising healthcare costs or part of the solution.”