Better Solutions for Healthcare

RAND Report: Hospital Prices in Indiana

By Chapin White

Large employers sponsor health plans that enroll roughly half of the U.S. population, and they are in a strong position to demand increased value from the health care system. But large employers generally lack useful information about the prices they are paying for health care services. This report reveals the prices paid to hospitals in Indiana from 2013 through 2016 by large, self-funded employer-sponsored health plans. Prices reflect the amounts paid per service, including amounts from both the health plan and the patient. To summarize hospital prices and make them easier to interpret, the report focuses on relative prices, using Medicare as a benchmark. The relative price equals the ratio of the price actually paid divided by the price that would have been paid — for the same services provided by the same hospital — using Medicare’s price-setting formulas.

Key Findings

Large Hospital Systems Generally Are Paid Higher Prices

  • The relative prices of hospital care vary widely among groups of hospitals and hospital systems, from around two times Medicare at the low end to more than three and a half times Medicare at the high end.
  • The upper end of the price distribution is dominated by the six large hospital systems.

Hospital Prices Vary Widely, Particularly for Outpatient Services

  • Employers participating in this study paid, on average, 358 percent of the Medicare rate for hospital outpatient services.
  • The prices paid for outpatient care vary widely from system to system and from hospital to hospital.
  • There is significant variation in hospital outpatient prices within systems. Within three large systems, the flagship facility is at or near the top of the price range within that system, while other, smaller hospitals within those systems tend to be paid lower outpatient prices….