Study confirms hospital radiology pricing unmoored from traditional market pressures.

December 06, 2021
by Robin Lasky, Contributing Reporter
A new study published in the Journal of Radiology found wild variation between insurance billing and hospital pricing for medical scans, in some instances billing up to ten times more for the same service.

For decades, standard practice among hospitals has been to negotiate prices for services with insurance carriers via confidential agreements, the details of which were rarely made available to consumers for the purpose of comparison shopping. This practice has resulted in huge disparities between what is billed to different insurance companies, government health plans, and uninsured patients, for the same service.

In January 2021, a new rule promulgated by the Centers for Medicaid and Medicare Services (CMS), aimed at controlling the growth of healthcare costs by arming consumers with more price transparency, went into effect. Compliance with the rule has remained a problem, however, with only about one-third of hospitals reporting the mandated price information. The rule has allowed a growing body of data to be compiled, which has provided further confirmation of how little hospital billing practices have come to resemble other industries in terms of reliance on competitive market forces to influence pricing.

“By reporting the significant price disparities among shoppable services, our research will empower employers, payers, and patients to demand changes," said study co-author John (Xuefeng) Jiang. "It also confirms policymakers’ concern that lack of transparency has hidden potentially abusive price behaviors."

The study found significant variation among hospital billing to commercial carriers, in addition to a significant difference between the legally prescribed rate paid by Medicare and the median average paid by hospitals to commercial insurance carriers.

For instance, for an MR brain scan, among the hospitals surveyed that were in compliance with the federal price transparency rule, payments to commercial carriers for this service ranged from $550.00 to $4,209.00, with a median negotiated commercial carrier price of $1,788.00, compared to a Medicare rate of $446.00. Medicare rates were found to be, on average, 2 to 6 times lower than the average commercial carrier rates for the same service.

“Gaining this kind of detailed knowledge of hospital commercial pricing makes it possible for payers and patients to shop for hospital care," said the study’s senior author Ge Bai in a statement. "No longer blindfolded, payers and patients can identify more affordable hospitals for these routine imaging services."

As reported by the Wall Street Journal, the Biden administration announced this month that the penalty for noncompliance with the CMS price transparency rule is set to increase to $2 million.