Study quantifies payment variation in private health plan markets

January 1, 2011

There's a large gap in private insurer inpatient payment rates among regions, with Miami-South Florida averaging 147% of Medicare rates, while San Francisco came in at 210%

NATIONAL REPORTS-A recent study of select geographic provider markets found a large gap in private insurer inpatient payment rates among regions, with Miami-South Florida averaging a reimbursement rate of 147% of Medicare rates, while San Francisco came in at 210% of Medicare reimbursement rates on average.

The study by the Washington, D.C.-based Center for Studying Health System Change (HSC) highlights the disparity in payments insurers made to hospitals and physician groups across the United States and was commissioned by Catalyst for Payment Reform (CPR), an employer group based in San Francisco.

"There are a few factors that directly affect the results," says Paul Ginsburg, HSC's president, and the author of the study. "Market concentration is a likely factor, along with the presence of an outstanding or 'flagship' hospital that everyone wants in their network."

Outpatient prices fared no better than inpatient rates, with the range starting at 234% of Medicare rates in Cleveland to 366% in San Francisco. Physician payment rates varied as well, ranging from 82% in Miami-South Florida, to 176% in rural Wisconsin.

Ginsberg says the decrease in Medicare and Medicaid reimbursement rates in recent years is resulting in hospitals cost shifting to private insurers to compensate for the lost revenue.

Suzanne Delbanco, executive director of CPR, says she found the results of the study more confirming than surprising. Most thought leaders instinctively know such variation exists-and the Dartmouth Atlas has long chronicled the variation in Medicare spending-this study aims to quantify some of the variation for the private market.

"The study found what many suspected: there is variation in private insurer payment rates to hospitals across and within local markets," according to Delbanco.