The National Academy for State Health Policy has developed a publicly available tool meant to shed light on hospital prices and costs.
The Hospital Cost Tool was developed with the help of Rice University's Baker Institute for Public Policy, Mathematica Policy Research and Arnold Ventures. The interactive tool offers several paths for users to examine data—from per-state to per-hospital figures. It includes different cost measures like hospital revenue, cost to charge ratios and profitability. The tool uses data from the national Healthcare Cost Report Information System (HCRIS) on more than 4,600 hospitals nationwide from 2011 through 2019. Data for 2020 will also be added.
“This new tool provides a view of publicly reported hospital data that isn’t otherwise available to policymakers and purchasers,” says Hemi Tewarson, NASHP’s executive director, in an announcement. “NASHP’s tool is an important resource for understanding costs of individual hospital and health systems—a critical first step to thoughtfully addressing rising health care costs.”
One notable metric is the breakeven point, which is the amount a commercial payer needs to pay to cover a hospital’s expenses. To calculate this amount, a hospital’s operating costs, profit or loss from public coverage programs, charity care and uninsured patient hospital costs, Medicare disallowed costs and other income and expenses are all taken into account. (This metric does not count physician direct patient services, and combines inpatient with outpatient.) At times, a hospital’s expenses versus what it receives in reimbursement vary greatly.
“States, employers, purchasers of healthcare are leveraging this data to negotiate better rates with hospitals and that’s happening in a varied policy way,” Maureen Hensley-Quinn, NASHP’s senior program director, said in a virtual demonstration of the tool Thursday.
Using the breakeven data as the starting point in negotiations enables a purchaser to offer a rate as an increase from the hospital’s costs instead of as a discount from the hospital chargemaster, Marilyn Bartlett, senior fellow at NASHP and former administrator of the Montana State Employee Health Plan, said in the announcement. Bartlett led the development of the tool.
Referring to her negotiation efforts in Montana, which saved the state millions of dollars, Bartlett explained she “was able to approach the hospital and say, ‘OK, here’s my data, I’ve looked at your Medicare Cost Report, I can see that you could break even at this level and I’m paying at this higher level.” In response, the hospital tried to claim they were losing money on Medicaid, Bartlett said, when in fact the data showed they were making a profit. “I want this fact-driven,” she recalled saying. In the end, she negotiated a lower, Medicare-plus rate. “This set of metrics helps you start that dialogue.”
“Peak Health Alliance has used the NASHP hospital cost tool extensively and credits a good bit of the millions of dollars we have saved our members to the insight it provides,” said Claire V. S. Brockbank, chief executive officer of Colorado’s Peak Alliance, a locally-led health insurance purchasing alliance, in a statement. “It has really leveled the playing field between Peak and our hospitals.”