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National Estimates of Price Variation by Site of Care
Aparna Higgins, MA; German Veselovskiy, MPP; and Jill Schinkel, MS

National Estimates of Price Variation by Site of Care

Aparna Higgins, MA; German Veselovskiy, MPP; and Jill Schinkel, MS
Between 2009 and 2013, for individuals with employer-sponsored insurance, prices for services performed at hospital outpatient departments were higher than in physician offices, and the magnitude of price differential increased over time.
Our study shows that price differentials by site of care exist at a national level, and that they are increasing over time. The amount of price differential varies by type of service, with the greatest differential occurring for imaging visits and procedures. Price differentials for some imaging procedures, such as chest radiography and MRI, are increasing at a faster rate than other services, such as office visits. This increase in differential was accompanied by shifts in volume of services from POs to HOPDs.

Our findings are consistent with previous research that showed HOPDs typically get paid more for services compared with other settings (PO and/or ASC) by both private insurers and Medicare.9,10,12 For example, the HOPD-to-PO payment ratio for a colonoscopy in 2011 was 2.06 among privately insured active and retired non­elderly autoworkers and their dependents compared with 2.84 in our study.12

Although our study did not focus on the reasons for a site-specific price differential, previous research offers some clues. Increases in site-of-care price differential over time may be related to vertical integration, which refers to hospital acquisition of physician practices—an increasing trend in recent years. This type of integration has shown to be associated with higher prices.15

Lack of transparency in the pricing of services and a limited amount of consumer comparison shopping could be contributing factors for persistence in price differential across sites of care.16 Our analysis demonstrates opportunities for OOP savings if individuals elected to comparison shop; evidence shows that consumers select lower-cost providers when presented with comparative price information.17 Other factors that could explain price differential include requirements for hospitals to have standby capacity and resources to perform a wide array of services, provide indigent care, etc.10 Lower payments for the same services in ASCs when compared with hospitals could be due to specialization in certain services, exclusiveness of services provided, and ASCs’ ability to perform procedures and surgeries in less time than a hospital outpatient department.18 Additional research is needed to understand the factors driving such price differentials to ensure that appropriate solutions are implemented to address this issue.

Limitations

Our results are limited to the time period and payers that contributed data to the Truven Health MarketScan databases throughout the study period. Any potential changes in payer mix during the study period that influenced any temporal trends were likely minimal due to the stable volume of and average payment for procedures throughout the study period. Furthermore, we observed that price differentials were similar to those reported in previous research that utilized data from a single-payer source, suggesting that payer mix is an unlikely source of the observed trends in HOPD-to-PO price ratios.12 Second, our analysis focused on 7 healthcare services; additional research is needed to determine if the study findings regarding site-specific price differential and volume shifting are similar or different for other services. Consequently, the full implications for impact on the total national healthcare spending are currently unknown. Finally, our study did not focus on the reasons for the observed site-specific price differentials. Further research is needed to identify the reasons for both the present site-specific price differentials and for their observed recent growth.

CONCLUSIONS
Our study shows the existence of price differentials for the same medical services delivered at different sites of care at a national level, and that these differences are increasing over time. This increase in differential was accompanied by shifts in volume of services from less expensive (PO) to more expensive (HOPD) settings. The resulting additional spending is non-trivial: the price differential between HOPD and PO was associated with $1.9 billion more in healthcare spending for the analyzed 7 services in 2013.  Additional research is needed to understand the factors driving such price differentials to ensure that appropriate solutions are implemented to address this issue.  

Author Affiliations: America’s Health Insurance Plans (AH, GV, JS), Washington, DC.

Source of Funding: None.

Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (AH, GV, JS); acquisition of data (AH); analysis and interpretation of data (AH, GV, JS); drafting of the manuscript (AH, GV, JS); critical revision of the manuscript for important intellectual content (AH, JS); statistical analysis (GV, JS); provision of study materials or patients; obtaining funding; administrative, technical, or logistic support (AH, GV, JS); and supervision (AH).

Address correspondence to: Aparna Higgins, MA, American’s Health Insurance Plans, 601 Pennsylvania Ave, NW, South Building, Ste 500, Washington, DC 20004. E-mail: ahiggins@ahip.org.
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