In 2019, the Department of Health and Human Services published regulations intended to increase hospital price transparency for patients and employers who insure their workers. These regulations include a requirement that hospitals post a machine-readable file on their website containing the price charged to cash-paying customers for 300 services, as well as the minimum and maximum rates that the hospital has negotiated with insurers. A Baker Institute report found that Texas hospitals have been slow to comply with the federal rules, particularly hospitals in Houston.
In August 2022, we reviewed the websites of three major health care systems in Houston: Baylor St. Luke’s Medical Center (St Luke’s), Houston Methodist (Methodist), and Memorial Hermann (MH) and were able to download price files for the flagship hospital in the Texas Medical Center for each of these providers. The files contain the prices that each hospital has negotiated with multiple commercial insurers, often by plan name (e.g., Aetna HMO POS). None of the files are comprehensive, but the economists found multiple instances where they could compare the price of a hospital admission involving a particular procedure or diagnosis across hospitals.
The Excel spreadsheet containing the price comparisons is now available to download here. We started with St Luke’s price file, which was the most user-friendly file for comparing prices of identical services across insurers. We then searched the Methodist and MH files for these same services and recorded prices by insurance plan. We limited the comparison to health maintenance organization (HMO) and preferred provider organization (PPO) plans marketed to employers by the four largest insurers for which prices were available for two or more hospitals: Aetna, Blue Cross Blue Shield of Texas (BCBSTX), UnitedHealthcare, and Humana.
We were able to locate prices that all three TMC hospitals negotiated with BCBSTX for 139 different services, and with UnitedHealth for 71 services. There were far fewer services for which one could compare prices across hospitals for the other insurers. St. Luke’s and MH reported prices for both HMO and PPO plans, while Methodist reported only one price. Because the Methodist prices appeared high, the economists compared the Methodist prices to PPO prices for St. Luke’s and MH.
For both BCBSTX and UnitedHealthcare PPO coverage, mean hospital prices were highest at Methodist ($49K and $59K), followed by MH ($30K and $28K); St. Luke’s showed the lowest price ($20K and $24K). However, one reaches a somewhat different conclusion about PPO pricing when looking at how often each hospital is the lowest-priced hospital. For BCBSTX enrollees, St. Luke’s is the lowest-priced hospital for 91% of services for which we could compare all three facilities. However, for UnitedHealthcare enrollees, St. Luke’s was the lowest-priced hospital for only 48% of services, while Methodist was the lowest-priced for 44% of services.
The average prices for Methodist may be higher because they charge more for high-cost services. For example, their price for a spinal fusion is $98,640, while MH charges $57,629.99, and St. Luke’s charges $52,788.63 for the same service. On the other hand, psychoses admissions cost $16,605.59 at St. Luke’s, $18,170.84 at MH, but only $3,728 at Methodist.
If the price for open heart surgery is $129,866 at Methodist but only $54,766.58 at St. Luke’s and $60,066.12 at MH, employers need to think long and hard whether they should be charging their employees the same copayment regardless of which hospital they choose for care. All three facilities provide excellent care, but the excess dollars paid to the highest-priced hospital translate into higher expenses that the employer will have to pass on to workers as larger insurance premiums in the subsequent year. Introducing tiered copayments for services in which one hospital charges much more than its competitors will distress some patients in the short run. But high-priced hospitals will face a drop in demand, which will force them to lower excessive prices in the long run, saving money for all customers.
It’s important to note that the price data posted so far by the TMC hospitals only allows one to compare prices for a limited number of services. However, in response to the federal government’s Transparency in Coverage rules, health insurers began releasing comprehensive data on their negotiated prices with U.S. hospitals in July 2022. Several organizations are working to process this data and make it available to purchasers, as well as individual consumers.
Table 1: Average Prices Negotiated by Insurers for Services where Prices were Reported by Each of 3 TMC Hospitals
Table 2: Ranking of Prices Negotiated by BCBSTX with 3 TMC Hospitals
Table 3: Ranking of Prices Negotiated by UnitedHealthcare with 3 TMC Hospitals