A P C D C O U N C I L

S E P T E M B E R 3 0 , 2 0 1 9

C H A P I N W H I T E

A D J U N C T S E N I O R P O L I C Y R E S E A R C H E R , R A N D

Medicare Price Benchmarking

in APCDs

This briefing represents the views of the author, and not RAND or RAND’s funders.

Use Case for APCDs

Source: https://www.apcdcouncil.org/file/281/download, italics added

“Used by policymakers, health care providers, plans, employers,

and academic researchers to ...

o understand regional variation in care delivery and price,

o monitor population health trends,

o and ensure patients have adequate access to care.”

Why Focus on Prices?

“It’s Still the Prices, Stupid”

$0

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U.S. OECD median

Hea

lth

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end

ing

per

Per

son

, 20

16

($U

.S.,

PP

P)

Source: Anderson, G. F., Hussey, P., & Petrosyan, V. (2019). It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt. Health Affairs, 38(1),

87-95. doi:10.1377/hlthaff.2018.05144.

“It’s Still the Prices, Stupid”

o Why private health plans?

o persistently high growth in spending per

capita

o Why hospitals?

o $1.1T industry

o private prices high, rising, and widely varying

$0

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lth

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end

ing

per

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son

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16

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.S.,

PP

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Source: Anderson, G. F., Hussey, P., & Petrosyan, V. (2019). It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt. Health Affairs, 38(1),

87-95. doi:10.1377/hlthaff.2018.05144.

^

Private HospitalX

The Context:

Unsustainable Growth in Employer-Sponsored Premiums

SOURCE: KFF Employer Health Benefits Survey, 2019 (http://files.kff.org/attachment/Report-Employer-Health-Benefits-Annual-Survey-2019)

Edging Out Salary Growth & Economic Development

7

o What do we know already?

o higher and growing faster than Medicare

o price growth is driving increased spending, not utilization

o vary widely from market to market, and within markets

o tend to be higher at large hospitals offering specialized services

Prices Paid by Private Health Plans for Hospital Care

Source: Selden, T. M., Karaca, Z., Keenan, P., White, C., & Kronick, R. (2015). The Growing Difference Between Public And Private Payment Rates For Inpatient Hospital Care. Health

Affairs, 34(12), 2147-2150. doi:10.1377/hlthaff.2015.0706.

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.

0.90

0.95

1.00

1.05

1.10

1.15

1.20

2012 2013 2014 2015 2016

Inpatient

Price Utilization and Intensity

0.90

0.95

1.00

1.05

1.10

1.15

1.20

2012 2013 2014 2015 2016

Outpatient

Price Utilization and Intensity

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.

High-priced Hospitals Tend to be Large,

and Part of Even Larger Systems

Source: White, C., Reschovsky, J. D., & Bond, A. M. (2014). Understanding Differences Between High- And Low-Price Hospitals: Implications For Efforts To Rein In Costs. Health Affairs,

33(2), 324-331. doi:10.1377/hlthaff.2013.0747

.

What Do We Not Yet Know?

o How do prices paid by private health plans vary ...

o hospital to hospital

o hospital system to hospital system

o state to state

o service line to service line

o Are prices in line with the value hospitals are providing?

o Are efforts to tamp down hospital price growth working?

The Inspiration

“Medicare Provider Utilization and Payment Data”

Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Downloads/Inpatient_Data_2016_CSV.zip

The Inspiration

Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Downloads/Inpatient_Data_2016_CSV.zip

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National Study (“RAND 2.0”)

Methods and Data

Our Approach

o Obtain claims data fromo self-funded employers, APCDs, health plans

o Measure prices in two wayso relative to a Medicare benchmark

o price per casemix weight

o Create a public hospital price reporto posted online, freely downloadable

o facilities and systems identified by name

o inpatient prices and outpatient prices

o Create private hospital price reports for self-funded employers

Two Ways to Measure Hospital Prices

1. “Relative prices”

2. “Price per casemix weight”

=𝐴𝑙𝑙𝑜𝑤𝑒𝑑 𝐴𝑚𝑜𝑢𝑛𝑡

𝑆𝑖𝑚𝑢𝑙𝑎𝑡𝑒𝑑 𝑀𝑒𝑑𝑖𝑐𝑎𝑟𝑒 𝐴𝑙𝑙𝑜𝑤𝑒𝑑 𝐴𝑚𝑜𝑢𝑛𝑡

=𝐴𝑙𝑙𝑜𝑤𝑒𝑑 𝐴𝑚𝑜𝑢𝑛𝑡

𝐶𝑎𝑠𝑒𝑚𝑖𝑥 𝑤𝑒𝑖𝑔ℎ𝑡𝑠

adjusted for

• casemix

• local wages

• teaching

• uncompensated

care

comparable across

service lines

adjusted for

• casemix

not comparable across

service lines

Why Use Medicare as the Benchmark?

o Largest purchaser of health care in the world

o Sets industry standards

o Prices and methods are empirically based and transparent

o Medicare prices intended to be fair

o Uses quality measures/value-based payment

Scope of the Study

Services Hospital inpatient, hospital outpatient

States CO, FL, GA, IL, IN, KS, KY, LA, MA, ME, MI, MO, MT, NC, NH, NM, NY,

OH, PA, TN, TX, VT, WA, WI, WY

Years 2015-7*

Hospitals 1598 short-stay general medical/surgical (~1/3 of national total)

Allowed amount

(2015-7)

$13.0B, $6.3B inpatient and $6.6B outpatient

Claims (2015-7) 330k inpatient stays, 14.2M outpatient lines

Data sources 2 all payer claims databases,

many health plans,

~50 self-funded employers

Funders RWJF, NIHCR, self-funded employers (not health plans, or hospitals)

*: NH,CO: 2012-7, IN: 2013-2017, MI,LA: 2015-2018

F O R F U L L R E P O R T A N D D E T A I L E D D A T A G O T O

H T T P S : / / W W W . R A N D . O R G / P U B S / R E S E A R C H _ R E P O R T S / R R 3 0 3 3 . H T M L

F O R A S C R O L L A B L E I N T E R A C T I V E M A P G O T O

H T T P S : / / E M P L O Y E R P T P . O R G / # V I S U A L I Z E

National Study (“RAND 2.0”)

Findings

All-State Trends in Hospital Prices Relative to Medicare

236.1% 237.2%240.9%

100%

125%

150%

175%

200%

225%

250%

2015 2016 2017

Rel

ativ

e p

rice

for

inp

atie

nt a

nd

o

utp

ati

ent h

osp

ital

ca

re Commercial

Medicare

Source: White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led

Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

State Average Relative Prices, 2017

100%125%150%175%200%225%250%275%300%325%350%375%400%425%

MI PA NY KY TN VT KS MO IL MA FL NM NC LA NH WA OH GA TX CO MT WI ME WY IN

Rel

ati

ve p

rice

for

ho

spit

al c

are

Inpatient + Outpatient Inpatient Outpatient

Source: White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led

Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

Commercial Relative Price TREND Varies at the State Level:

Comparison of 5 States

Source: White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led

Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

Hospital System Relative Prices, All States, 2015-7

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

550%

123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354

Inpatient + Outpatient Inpatient Outpatient

Source: White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led

Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

Colorado Hospital System Relative Prices, 2017

0%

100%

200%

300%

400%

500%

Inpatient + Outpatient Inpatient Outpatient

Source: White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led

Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

Colorado Rating Area Relative Prices, 2017

0%

100%

200%

300%

400%

500%

1 - Boulder 3 - Denver 9 - West All 2 -ColoradoSprings

8 - East 7 - Pueblo 5 - GrandJunction

6 - Greeley 4 - FortCollins

Inpatient + Outpatient Inpatient Outpatient

Source: Author’s analysis based on data reported in White, Chapin, and Christopher Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary

Widely: Findings from an Employer-Led Transparency Initiative, 2019. https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

.

The Hospital Price Heat Map (from employerptp.org/#visualize)

The Hospital Price Heat Map (from employerptp.org/#visualize)

Prices paid to hospitals by private health plans

do not reflect a functioning competitive market

What Does it Mean?

Challenges

Technical Challenges

o Identifying providerso NPIs do not map 1-to-1 with Medicare provider numbers

o matching on provider name/address possible but messy, time consuming

o Complexity in Medicare price settingo approx. 25 distinct payment systems in Medicare

o each uses a different grouping & pricing algorithms

o some groupers (e.g., APCs) and pricers (e.g., IPPS) are very complicated

o CMS doesn’t prioritize analyst-friendly pricing tools

o Missing fieldso Medicare prices for some services (e.g. SNF, home health) depend on patient

assessments that aren’t in commercial data

Legal/Regulatory Challenges

o Gobeille

o Restrictions on APCD use (aherm, Minnesota)

o Many APCDs expected to be financially self-sustaining

P L A N N E D R E L E A S E D A T E : M A R C H , 2 0 2 0

Round 3.0 is Underway

Enhancements

o Expand use of APCDso CO, DE, RI, ME, NH

o Expand set of participating employers

o Expand provider types to include ASCs, professionals in facility settings, and specialty hospitals

o Policy analyseso what can state and federal policy makers do?

o what would impacts be on hospitals and patients?

A Vision for APCDs

E M P L O Y E R S ’ F O R U M O F I N D I A N A

R O B E R T W O O D J O H N S O N F O U N D A T I O N

N A T I O N A L I N S T I T U T E F O R H E A L T H C A R E R E F O R M

I B M W A T S O N H E A L T H

C E N T E R F O R I M P R O V I N G V A L U E I N H E A L T H C A R E ( C I V H C )

N E W H A M P S H I R E C O M P R E H E N S I V E H E A L T H C A R E I N F O R M A T I O N S Y S T E M

C O L O R A D O B U S I N E S S G R O U P O N H E A L T H

T H E H E A L T H F O U N D A T I O N O F G R E A T E R I N D I A N A P O L I S , I N C .

H O U S T O N B U S I N E S S C O A L I T I O N O N H E A L T H

N E W M E X I C O C O A L I T I O N F O R H E A L T H C A R E V A L U E

E C O N O M I C A L L I A N C E F O R M I C H I G A N

Acknowledgements

C O N T A C T : C H A P I N W H I T E

C W H I T E @ R A N D . O R G 2 0 2 - 2 0 3 - 0 2 6 0

@ C H A P I N W H I T E

Thank You!

o Public reporto https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf

o Detailed datao https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.data

.zip

o Interactive mapo https://employerptp.org/#visualize

o FAQ on enrolling in next roundo https://employerptp.org/wp-content/uploads/2019/05/RAND-EFI-hospital-price-transparency-study-

Round-3.0-FAQ.pdf

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