Report examines stark differences between commercial costs for hospital services in Oregon compared to Medicare prices

By

Shane Ersland

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Senators discussed the stark difference in costs Oregon commercial healthcare plans pay for hospital services compared to those paid by Medicare during a Senate Interim Committee on Health Care meeting last week.

Dr. Christopher Whaley, associate professor at Brown University’s School of Public Health, said Brown used data from the Oregon All Payer All Claims database to study prices for hospital care in the state from 2018 to 2022. 

“We aggregated the data to measure prices in two ways,” Whaley said. “The most common is relative to a Medicare benchmark. Essentially, we’re seeing how much Medicare would have paid for the exact same service, on the exact same day, from the exact same provider relative to what commercial payers are paying. The attractive thing about using Medicare benchmarks is that it’s transparent, with lots of input from the industry and other stakeholders. And it’s a pretty good consensus of what it costs a typical hospital to provide a service.”

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Brown analyzed all states, and the national average cost for hospital services for commercial payers across the country was 254 percent of what Medicare pays. Oregon came in close to the average national rate as commercial payers paid 255 percent of what Medicare pays, Whaley said. 

“On average, an employer or commercial insurer in Oregon is paying Medicare rates, plus 150 percent on top of what Medicare pays for a 255 percent average rate,” he said. “States like Michigan are below 200 percent of Medicare. Other states like Florida and Georgia are above 300 percent of Medicare. In the Pacific Northwest and on the West Coast, Oregon is relatively (in the) middle of the pack.”

Prices are not linked to quality of care, Whaley said. Healthcare costs are increasing rapidly, driven by increases in provider prices, which are fueled by consolidation, he said. 

“And the important lesson here is that healthcare costs come directly out of worker wages, and place a tremendous amount of pressure on workers. A lot of what we see in healthcare markets is driven by consolidation that hasn’t been appropriately responded to by stakeholders and policymakers. And it’s important to make sure employers, purchasers, and patients are on an equal playing field, and that healthcare markets are competitive.”

— Whaley

Healthcare consolidation continues to increase across the country, and Oregon lawmakers passed House Bill 2362 in 2021 to create a Health Care Market Oversight program in order to oversee healthcare consolidation, which began operating in March 2022. The Oregon Health Authority (OHA) reviews proposed business deals through the program to ensure they will lower patient costs, increase access to service, improve care, and promote health equity. 

Dr. Piper Block, research and data manager at OHA, discussed the state’s hospital payment report, which is an online interactive dashboard that shows how much commercial insurers pay hospitals for common procedures. 

“Our dashboard focuses on commercial insurers, and those prices are generally higher than those of Medicare or Medicaid,” Block said. “It shows the expected reimbursement, most common procedures, and changes over time.” 

OHA examined colonoscopies as a common procedure performed across the state’s hospitals as a benchmark, and found that payments for them varied widely among hospitals, Block said. The median commercial payment for colonoscopies in 2021 was around $2,600 statewide. The lowest median colonoscopy payment was $1,316, and the highest payment for one was $6,902. 

“From 2020 to 2021, the median payment decreased by 0.7 percent for colonoscopies statewide. However, individual hospital payments ranged from a 16.7 percent decrease to a 32.5 percent increase from 2020 to 2021. Overall, we see huge amounts of price variation within hospitals over time through [different] procedure categories. There are a host of different reasons why that could be.”

— Block

OHA plans to issue a new hospital payment report on July 1, which will feature 2022 data and some new features, Block said. 

“We’ll be comparing commercial to Medicare prices, we’ll be comparing emergency to non-emergency services, and you’ll also be able to see prices by region throughout Oregon to be able to ascertain patterns throughout the state,” she said.

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