New playbook aims to help employers, plan sponsors negotiate hospital prices

A new playbook aims to arm employers with the tools needed to negotiate hospital prices.

The National Alliance of Healthcare Purchaser Conditions released the book on Thursday, and it offers strategies for plan sponsors to harness newly-released price transparency and quality data as leverage to drive down prices. The book notes that hospitals charge commercial plans significantly more than Medicare, often with prices 140% to 200% higher than Medicare rates.

The group says a "fair price" would instead "allow for a reasonable markup from costs and a price that is competitive with peer hospitals" without price-gouging the commercial market.

“For the first time, we finally have data that reinforces what we’ve long known—hospitals prices are out of control—and we can’t rely on health systems and health plans to course correct,” said Michael Thompson, National Alliance president and CEO, in a release. “Employers not only have the right, but a responsibility as plan fiduciaries, to negotiate fair prices. Now is the time for honest discourse and action on what is reasonable to pay for services provided.”

So what can employers do in these negotiations? For one, using the data now available, they can identify what a hospital needs to earn to break even and can build potential rates from there. Once that breakeven point is determined, plan sponsors can compare prices between hospitals to get a feel for market dynamics.

The Employers’ Forum of Indiana has launched Sage Transparency, a free hospital pricing dashboard that employers can use to compare hospital pricing and quality data. The tool pulls from multiple data sources, including RAND Corporation, the Centers for Medicare & Medicaid Services and Turquoise Health.

The National Alliance says that this tool and others like it are valuable resources that employers can tap into when determining a fair market price for hospital services.

And While there isn't a one-size-fits-all solution, plan sponsors can mix and match the suggestions in the playbook to meet their local needs, the alliance said.

The playbook also includes a comprehensive guide to hospital price transparency regulations, providing employers with a clear resource to look to when navigating these policies.

“While there is much to fix in our nation’s healthcare system, one of the greatest offenders is hospitals that are overcharging and realizing huge profit margins at the expense of employers, their employees and families,” Thompson said in the release. “Regional coalitions and their employer-purchaser members are playing a key role in driving and leveraging transparency data to get to a fair price and overcome the imbalance of power.”