Medicaid reimbursement variability across states impacts patient pricing
Crowe examines the impact of healthcare price transparency legislation on hospitals’ bottom lines
CHICAGO – The state you live in is likely a driving factor in what you pay for certain healthcare procedures and services, according to data gathered by the Crowe Revenue Cycle Analytics (Crowe RCA) software. Research from Crowe, a public accounting, consulting and technology firm in the U.S. with offices around the world, revealed a correlation between lower Medicaid per-patient rates and higher commercial and managed care per-patient rates. A new Crowe report, “Price Transparency in Healthcare: It Won’t Help Hospitals,” looks further into this topic.
Recently enacted price transparency legislation requires hospitals to publish their managed care rates – the actual reimbursement rate that they negotiated with insurance providers versus their gross charges for a service. This legislation aims to provide healthcare consumers greater visibility into the actual out-of-pocket costs for treatments, giving them the option to shop around based on price. While price points driving consumer decisions might apply some pressure on healthcare prices, other systemic forces are at play regarding price volatility, including variability of Medicaid reimbursement across states.
The report is based on data from the Crowe RCA benchmarking solution, which captures every patient transaction for nearly 1,500 hospitals and more than 100,000 physicians nationally for purposes of automating hindsight, accounts receivable valuation and net revenue analyses. Within its benchmarking database, Crowe analyzed a portfolio including 45 states, comprising 707 hospitals within Medicaid-expansion states and 445 hospitals in nonexpansion states, as of 2019.
Crowe research found outpatient net payments that hospitals receive from Medicaid payers varied greatly across states. In a broad sampling of states, the variability was striking, with payment discrepancies ranging from $200 to $650 per patient. Several factors affect these payment amounts, including acuity, locality adjustments and types of programs, but one thing is clear: state-run Medicaid programs are not uniform across the country, in process or payment.
In order to better compare managed care to Medicaid reimbursement across sites with varied cost of living and other factors that can affect reimbursement, Crowe analyzed average outpatient managed care and Medicaid reimbursement by state as a percent of Medicare outpatient rates for a similar set of services. For states with lower Medicaid reimbursement rates, including Florida (40%), California (39%) and Wisconsin (39%), the comparative rates for managed care were high at 268%, 261% and 251%, respectively. Conversely in states with higher Medicaid reimbursement rates such as Iowa (78%) and Minnesota (97%), the managed care rates were lower at 166% and 188%, respectively.
“Hospitals in lower-paying Medicaid states were driven to find alternative methods to sustain their financial margins,” said Brian Sanderson, managing principal of healthcare services at Crowe. “One of those methods is cost-shifting – that is, garnering higher reimbursement from other payers, such as employer-based managed care plans. Effectively, if you live in a state with lower Medicaid reimbursement rates and get your insurance through your employer, you’re likely being charged more than what the exact same service costs in other states.”
According to Sanderson, as more and more charge data becomes public with price transparency legislation, hospitals will likely be driven away from cost-shifting. “Hospitals and health systems will need to focus on highlighting their best attributes, like quality of care, convenient locations and well-rounded services offerings,” Sanderson said. “We envision a future where many parameters of a patient’s decision are graded, similar to how we shop for cars. For example, a luxury SUV costs more than a no-frills sedan model – but differences in reliability, safety features and prestige might lead some customers to choosing the more expensive option.”
To download a copy of the report, please visit “Price Transparency in Healthcare: It Won’t Help Hospitals.”
About Crowe Revenue Cycle Analytics (Crowe RCA) benchmarking data
Nearly 1,500 hospitals and more than 100,000 physicians use the Crowe RCA solution to capture every patient transaction for purposes of automating hindsight, accounts receivable valuation and net revenue analyses. The benchmarking database spans 45 states and comprises 707 hospitals within Medicaid-expansion states and 445 hospitals in nonexpansion states, as of 2019.
About Crowe
Crowe LLP is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory and consulting services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.
Recently enacted price transparency legislation requires hospitals to publish their managed care rates – the actual reimbursement rate that they negotiated with insurance providers versus their gross charges for a service. This legislation aims to provide healthcare consumers greater visibility into the actual out-of-pocket costs for treatments, giving them the option to shop around based on price. While price points driving consumer decisions might apply some pressure on healthcare prices, other systemic forces are at play regarding price volatility, including variability of Medicaid reimbursement across states.
The report is based on data from the Crowe RCA benchmarking solution, which captures every patient transaction for nearly 1,500 hospitals and more than 100,000 physicians nationally for purposes of automating hindsight, accounts receivable valuation and net revenue analyses. Within its benchmarking database, Crowe analyzed a portfolio including 45 states, comprising 707 hospitals within Medicaid-expansion states and 445 hospitals in nonexpansion states, as of 2019.
Crowe research found outpatient net payments that hospitals receive from Medicaid payers varied greatly across states. In a broad sampling of states, the variability was striking, with payment discrepancies ranging from $200 to $650 per patient. Several factors affect these payment amounts, including acuity, locality adjustments and types of programs, but one thing is clear: state-run Medicaid programs are not uniform across the country, in process or payment.
In order to better compare managed care to Medicaid reimbursement across sites with varied cost of living and other factors that can affect reimbursement, Crowe analyzed average outpatient managed care and Medicaid reimbursement by state as a percent of Medicare outpatient rates for a similar set of services. For states with lower Medicaid reimbursement rates, including Florida (40%), California (39%) and Wisconsin (39%), the comparative rates for managed care were high at 268%, 261% and 251%, respectively. Conversely in states with higher Medicaid reimbursement rates such as Iowa (78%) and Minnesota (97%), the managed care rates were lower at 166% and 188%, respectively.
“Hospitals in lower-paying Medicaid states were driven to find alternative methods to sustain their financial margins,” said Brian Sanderson, managing principal of healthcare services at Crowe. “One of those methods is cost-shifting – that is, garnering higher reimbursement from other payers, such as employer-based managed care plans. Effectively, if you live in a state with lower Medicaid reimbursement rates and get your insurance through your employer, you’re likely being charged more than what the exact same service costs in other states.”
According to Sanderson, as more and more charge data becomes public with price transparency legislation, hospitals will likely be driven away from cost-shifting. “Hospitals and health systems will need to focus on highlighting their best attributes, like quality of care, convenient locations and well-rounded services offerings,” Sanderson said. “We envision a future where many parameters of a patient’s decision are graded, similar to how we shop for cars. For example, a luxury SUV costs more than a no-frills sedan model – but differences in reliability, safety features and prestige might lead some customers to choosing the more expensive option.”
To download a copy of the report, please visit “Price Transparency in Healthcare: It Won’t Help Hospitals.”
About Crowe Revenue Cycle Analytics (Crowe RCA) benchmarking data
Nearly 1,500 hospitals and more than 100,000 physicians use the Crowe RCA solution to capture every patient transaction for purposes of automating hindsight, accounts receivable valuation and net revenue analyses. The benchmarking database spans 45 states and comprises 707 hospitals within Medicaid-expansion states and 445 hospitals in nonexpansion states, as of 2019.
About Crowe
Crowe LLP is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory and consulting services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.
