M. Mead1, A. Ibrahim1 1University Of Michigan, Department Of Surgery, Ann Arbor, MI, USA
Introduction: Hospitals markets have rapidly consolidated, raising concerns for the potential impacts on the prices of surgeries for patients. While there is evidence that hospital consolidation had led to increases in the prices of surgery for patients, little is known how insurer consolidation may impact the prices negotiated between hospitals and insurers. Concerns have been raised that as insurers dominate entire markets, the increased negotiating power would lead to lower reimbursement rates for hospitals.
Methods: We took advantage of the recently enforced Hospital Price Transparency Rule that requires hospitals to publicly disclose their negotiated prices with payers for 23 elective surgical procedures. These hospital-reported prices document insurance plan features and the insurer for which a price is negotiated with. Prices were linked to the 2021 Kaiser Family Foundation Large Group Insurer Market share database, which measures at the state level the percent of insurance plans managed by a market leading insurer. States were divided into three tertiles based on insurer market concentration: high concentration (least competitive), medium concentration, and low concentration (most competitive). The overall goal of our analysis was to identify how risk-adjusted negotiated prices for elective surgery may differ when negotiated with a market leading insurer and the insurance concentration market. We utilized a 2024 cross-sectional multivariable linear regression which adjusted for the type of insurance plan (e.g. HMO vs PPO), payer type (e.g. Medicare Advantage vs. Commercial), and procedure. Because there may be appropriate sources of geographic variation, we adjusted prices using the 2023 area wage index, a measure utilized by CMS to modify payments based on the cost of labor.
Results: 2,259,591 prices were reported by 3,047 hospitals for the 23 elective surgical procedures. Market leader insurer share ranged from 70% to 96% in high concentration markets compared to 15% to 51% in low concentration markets. Amongst all elective surgeries, market leading insurers, on average, in medium concentration markets pay 18.1% less vs low concentration markets ($6,718vs$8,200, p<.001), while high concentration markets pay 26.9% less compared to low concentration markets ($5,997vs$8,200, p<.001). When stratifying by elective surgery, 17 out of 23 elective surgeries were reimbursed significantly less by the market leading insurer in high concentration markets.
Conclusion: Our investigation demonstrates that market leading insurers negotiate significantly lower prices for elective surgery with hospitals. Even more so, when a market leading insurer operates a substantial proportion of an insurance market, negotiated prices for elective surgery are even lower. These initial findings suggest that insurer market power may work in opposition to the increases in the prices of surgery seen with increasing hospital market concentration.