Inpatient stays drive price variation
Outside of inpatient stay, episodes of care services vary little
The price of an initial inpatient stay explains almost all of the wide spending variation from hospital to hospital on episodes of care, such as for knee or hip replacements, the National Institute for Health Care Reform has found.
Previous research has shown that private health plans pay inpatient hospital prices that vary widely within and across local healthcare markets. This study, conducted by researchers at the former Center for Studying Health System Change, focused on spending by health plans for the entire episode of care. That included hospitalization, all physician services, rehabilitation during the stay and up to 30 days after discharge, and any readmission with 30 days of the initial discharge.
For example, average spending for uncomplicated inpatient knee and hip replacements across 36 hospitals in the nine markets in the study ranged from $17,500 to $37,000 for all services, the study said. The spending variations occurred despite the procedures and recuperative process being fairly standardized, the population generally uniform and payments adjusted for local input prices.
[See also: Price transparency pressures.]
The pattern of spending variation was similar for other conditions, with hospital inpatient price differences accounting for the vast majority of spending variations rather than difference in spending on physician and other non-hospital services during and after discharge or on readmissions. And spending per episode for hospitals’ case mix for different service lines, such as orthopedics and cardiology, tended to track one another.
According to the findings, “private purchasers can focus on overall hospital inpatient price levels rather than pursue bundled payments for episodes of care or service-line-specific purchasing strategies,” said Chapin White, a former HSC senior researcher now at RAND and lead author of the report, in a statement.
Among other findings, all but one of the markets had at least one low-spending hospital and one or more high-spending hospitals. Related services, such as physician or rehabilitation care, accounted for 23 percent of the total spending on knee and hip replacements, but they were responsible for very little of the variation across hospitals.
Initial hospital stays drove 68 percent of spending on hospitalization episodes, but differences in the prices of initial hospital stays accounted for more than 80 percent of the variation in overall episode spending.
The researchers used 2011 claims data for 590,000 autoworkers and their dependents to examine the spending variation on their episodes of care in nine metropolitan areas, including Cleveland, Detroit, Indianapolis and Kansas City.
