Apr 4, 2023 - Health

Hospitals likelier to offer discounts to patients who pay cash

Illustration: Natalie Peeples/Axios

Hospitals routinely charge less to patients who pay in cash and seek to recoup the difference from commercially insured patients in markets where they can exert leverage, according to a new Johns Hopkins study published in Health Affairs.

Why it matters: The analysis for 70 services — drawn from data reported by 2,379 hospitals as of September 2022 — provides another window into the opaque world of hospital pricing and could be a data point for employers in their negotiations with insurers or directly with providers.

  • It also showed how 17 months after the implementation of a federal hospital price transparency rule, nearly half of the general acute care hospitals still had not disclosed most of their prices for mandated procedures, the authors wrote.

What they found: Hospitals routinely calculated cash prices and commercially negotiated rates in increments of a 5% discount from list prices, or "chargemasters."

  • Cash prices were likelier to be lower than negotiated rates at nonprofit or government-owned hospitals that see more uninsured patients — and in areas with strong hospital market power, where facilities can shift costs to commercially-insured patients.
  • Offering lower-cash-price services could attract patients who choose to forgo coverage because of the high cost of health plans and could save facilities billing- and insurance-related expenses, the authors wrote.

Between the lines: Hospitals may be likelier to set lower cash prices if they're located in areas with high uninsurance or lower median household income, the study found.

  • Overall, cash prices were lower than or equal to the median negotiated rates for the same procedure in the same hospital 47% of the time — most commonly for consultations, exams and other "evaluation and management" services.

Of note: The authors said their study was limited by the fact that even hospitals that disclosed prices did so for 44 of the 70 procedures, on average. That prevented them from examining patient volume, care use or quality outcomes by cash-paying patients.

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