CHICAGO (January 14, 2020) – In 2019, President Donald Trump issued an executive order on healthcare pricing transparency, with the goal of empowering patients to be able to “shop around” to compare pricing for similar services at different hospitals. Using data gathered by the Crowe Revenue Cycle Analytics (Crowe RCA) software, a Crowe report, “Transparent Doesn’t Equal Rational: Problems With Transparency Order,” looked further into this topic.
Crowe is a public accounting, consulting and technology firm with offices around the world. The Crowe RCA solution captures every patient financial transaction in more than 1,200 hospitals nationwide. In this report, Crowe analyzed its national hospital database for individual pricing levels of 100 common outpatient procedures priced at more than $500 in gross charges, the list price that hospitals post in their systems. It also reviewed the average allowable revenue – the amount paid out of pocket after insurance by the patients – for each outpatient procedure studied.
Overall, the national disparity between gross charges for each procedure was significant, at an average of 297% difference between the lowest and highest gross charge for each individual procedure. The national disparity in allowable revenue (expected payment) was also notable at 236%.
For example, the report examined the specific bill code for a high-severity, potentially life-threatening emergency room visit. For the highest (top 5%) of hospitals, the average gross charge was $3,499. For the lowest (bottom 5% of hospitals) the average gross charge was $692, representing a 406% difference. This differential also holds true for the allowable amounts, in which the highest hospitals expected to collect $736, with the lowest at $192.
Pricing disparity also occurred on a local basis. The report reviewed a standard MRI procedure in a metropolitan area of more than 3 million people. There was a 115% difference between the highest hospitals’ gross average charge ($4,548) and the lowest hospitals’ charge ($2,115). There was also a 126% differential between the highest hospitals’ allowable amount ($1,390) and the lowest hospitals’ allowable amount ($615). This means two patients could undergo the same MRI procedure in the same area, with one paying $1,390 and the other paying $615.
In the future, patients may be able to actively shop for and select a medical service, such as an MRI, based on a healthcare price transparency tool, per the executive order. However, according to Brian Sanderson, managing principal of healthcare services at Crowe, selecting a hospital only based on price does not account for many other factors that a patient might consider such as the brand value of the hospital, consumer ratings, quality of care, convenience and accessibility, customer experience, and, perhaps most importantly, urgency.
“Consumers want to understand the confusing disparity among prices for similar services,” said Sanderson. “An increase in transparency will allow consumers to apply normative, rational purchasing criteria when making nonurgent choices on where to get care. Hospitals that can clearly state the total price to be paid for a procedure before those services are delivered – and then charge only that price once they are delivered – will give patients the basic tools they need to make well-informed decisions.”
To download a copy of the report, please visit Transparent Doesn’t Equal Rational: Problems With Transparency Order.
About Crowe Revenue Cycle Analytics (Crowe RCA) benchmarking data
More than 1,200 U.S. hospitals 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.
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.
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