Providers will be forced to navigate a challenging year as they try to rein in expense growth fueled by pandemic-driven labor shortages.

This year’s outlook for a large chunk of the healthcare sector remains negative as inflation and pricier labor create difficult operating conditions for nonprofit providers, Moody’s Investor Service said. 

As a result, health systems and hospitals are likely to clash with insurers over desired rate increases to offset higher expenses and providers will look to increase their revenue as much as possible by bargaining for higher rates.

Even though insurers have fared better than their provider counterparts, companies are still expected to face some headwinds this year. Still, Fitch Ratings says the 2023 outlook for the insurance sector is neutral. 

A recession could also take a bite out of enrollment at the same time the government is poised to roll back consumer protections that kept millions enrolled in government-sponsored plans during the COVID-19 pandemic.

Losing members could put downward pressure on both the top and bottom line for insurers, analysts said.        

Providers likely to push for rate increases

How much will healthcare prices increase in 2023?  

“That's by far and away the number one thing that we all want to know about,” said Kevin Holloran, senior director of U.S. Public Finance at Fitch Ratings.

Providers feeling the pinch are going to fight for rate increases in contracts that come due this year, Holloran said, adding that the two sides are “wildly apart” so far, according to his discussions with providers. 

This year will be contentious as providers may opt to play hardball in bargaining for better prices and may walk away during negotiations, leading to out-of-network periods for patients, he said.

“It's going to be very bumpy, very contentious this year,” Holloran said, characterizing 2022 as a terrible year for most providers.

Unlike other industries, many healthcare providers were unable to raise rates as inflation soared to record highs. Providers are locked into multi-year payment deals with insurers, bolstering their desire for higher rates in coming years.

Labor pains continue

Labor shortages and pricey contract rates are continuing to strain providers, contributing in large part to mounting financial pressures.

High labor costs have made it harder for hospitals to post positive margins, Erik Swanson of hospital consultancy Kaufman Hall recently said in the firm’s latest flash report. 

“The big push is to get the agency contract labor costs out,” said Suzie Desai, senior director at S&P Global Ratings. 

Some of the nation’s most recognized health systems were dragged into the red last year, weighed down by increased labor costs, including Mass General Brigham, Cleveland Clinic and Intermountain Healthcare.  

The shortage is driven in part by burned out nurses who have left the bedside for other positions — or the industry entirely. Providers have had to turn to staffing firms to help fill the gap, with agencies commanding high rates amid demand to fill openings. 

Hospitals are not the only facilities short on workers. Effects of nursing home shortages are rippling throughout the sector. Patient hospital stays are unnecessarily longer as nursing homes struggle to take on more patients without more staff, serving as an added financial burden for hospitals. 

Eyes on utilization and commercial enrollment as possible recession looms

Some eonomists are expecting a recession to squeeze the U.S. economy this year and potentially spur job losses.

As a result, insurers may see a dip in enrollment, leading patients to think twice about seeking out healthcare services.

Health insurance coverage in the U.S. is tightly linked to employment, so job losses could pose a financial headwind for insurers if they result in coverage losses. 

Patients may be reluctant to spend money on copays and deductibles for healthcare services as the threat of a recession looms, especially as record-high inflation grabs a larger chunk of American paychecks.  

“Healthcare dollars are getting squeezed out of peoples’ budgets,” Jefferies Analyst Brian Tanquilut said.

Consumer confidence will also influence healthcare utilization, he added.

At one of the largest hospital chains, HCA Healthcare, volumes for this year are expected to be lower than historical averages, Tanquilut said.

However, the so-called tridemic — RSV, the flu and COVID-19 — could inflate volumes, especially if outbreaks are more severe. 

Medicaid enrollment expected to drop after pandemic protections end

Pandemic protections shielded millions from losing health insurance at the onset of the COVID-19 pandemic.

As a result, enrollment in Medicaid soared, increasing 27% to cover more than 90 million people, with states barred from removing people from the program due to the public health emergency.

Those pandemic protections are set to end in 2023, threatening to cut off access to care for millions. An estimated 5 million to 14 million are expected to lose coverage as states resume eligibility checks, according to the Kaiser Family Foundation.

For insurers like Centene and Molina, prior revenue gains, as a result of the pause on eligibility checks, are expected to deflate.

Analysts are keeping a close eye on how many members insurers will be able to convert from the Medicaid program to Affordable Care Act exchange plans.   

Home health push continues

Health insurers continued to place bets on the home health sector, an area that will remain a key focus in 2023.

“The crux of health insurance is keeping costs down,” said Dean Ungar, an analyst at Moody’s Investors Service. 

Home health aides have a unique advantage to temper costs by working in a member’s home, enabling them to ensure people are taking needed medications and checking on other factors that influence a person’s health.

“They can identify things that can prevent emergency room visits by just being proactive,” Ungar said. 

Some of the largest payers placed big bets on home health in 2022.

UnitedHealth Group signed a $5.4 billion deal to acquire home health provider LHC Group. The transaction is expected to close early this year.  

CVS signed an $8 billion deal to acquire home health provider Signify, beating out other potential acquirers, including Amazon.

These moves follow Humana’s bid for home health giant Kindred. Humana acquired the remaining stake of Kindred in 2021 for $5.7 billion. 

Medicare Advantage expected to surpass enrollment milestone

Medicare Advantage enrollment is expected to reach a milestone this year, exceeding 50% of the total Medicare population in 2023.

This change impacts providers too, as reimbursements rates can vary.   

Enrollment in MA plans has more than doubled since 2007, according to the Kaiser Family Foundation. Still, the program has faced continued criticism over financial incentives to make members appear sicker in order to increase monthly capitation rates.  

“I think the reason this is important is because it’s really a restructuring of the Medicare program,” said Jeannie Fuglesten Biniek of Kaiser Family Foundation. “As Medicare Advantage Plans play a bigger role, we see that there’s just a lot more variation introduced into what it means to have Medicare coverage.”

Dive Brief:

• Healthcare costs are expected to rise 7% next year as inflation drives providers to seek rate increases from insurers and pharmaceutical costs rise, according to PwC’s annual report.
• The consultancy, which surveyed actuaries at insurers that offer group and individual plans, said the increase outstrips its predictions for 2022 and 2023, which were 5.5% and 6% respectively.
• Some trends are pushing costs down, like the availability of more biosimilar drugs and a shift toward cheaper outpatient care. A number of other factors are expected to be cost neutral but key to watch, including health plans’ investment in value-based care, COVID-19 impacts, behavioral healthcare utilization, health equity initiatives, price transparency rules and Medicaid redeterminations, PwC said.

Dive Insight: 

Though inflation pressured the U.S. economy in 2022, its impact wasn’t felt as significantly in healthcare, an industry where many prices are locked in existing annual or multi-year provider contracts.

But providers continue to face workforce shortages and high labor costs, pushing them to seek higher reimbursement from payers to address financial shortfalls, PwC said.

Even if employment in the healthcare sector stabilizes next year, health plans are still expected to feel the blow as demand for care increases utilization. Both UnitedHealth and Humana recently flagged higher outpatient utilization than expected after patients delayed nonessential care during the pandemic.

High-cost drugs are also predicted to push increased healthcare costs next year, compounded by shortages and supply chain disruptions. The report pointed to new cell and gene therapies — many of which have been approved by the Food and Drug Administration in the past few years — and the rise of pricey GLP-1 agonist drugs for diabetes and obesity that have seen skyrocketing demand.

“New drugs typically exist in the market for 15 years on average without competition from generic drugs, along with general increases in drug prices over time,” the report’s authors wrote. “Multiple insurers report that the trend used for pricing 2023 plans was lower than actual experience, driven by higher-than-expected pharmacy trends for both brand and specialty drugs.”

But biosimilars — biologic medicine that’s very close to a previously FDA-approved product — could buck that trend. The report noted the lower costs for biosimilar products would have a modest impact in 2024, but most health plans surveyed had hopes of increased savings in the future.

Care provision shifting to cheaper outpatient sites, a trend accelerated by the pandemic, could also deflate costs, the consultancy found.

“With the increased demand for outpatient surgeries, home-based services and virtual care, the healthcare delivery system has reached a new phase,” PwC said. “Plans are factoring in higher utilization of less expensive in-person settings and virtual care going forward when pricing their 2023 plans and beyond.”

Sponsored content

By Creatives On Call

Healthcare payors are integral in maintaining a balanced and effective healthcare ecosystem. They do this by facilitating the financial aspects of healthcare delivery, managing risk, coordinating care for patients, incentivizing preventative care, and providing access to healthcare services.  

Acquiring healthcare providers can be challenging for payors due to the complexities associated with network adequacy, reimbursement negotiations, technology integration, regulatory and compliance requirements, and prior authorization delays.  

According to a 2023 survey by the American Medical Association, 86% of physicians report that prior authorization delays have a negative impact on patient outcomes. While prior authorization aims to manage costs and ensure appropriate care, delays in this process can lead to frustration for both providers and patients. 

Today’s Landscape For Healthcare Payors

Because the healthcare industry is undergoing radical changes due to government reforms, consumerization, and new technologies, there is intense competition among payors to attract the best providers.  

Leading healthcare payors across the country are looking for help with: 

• Reducing administrative burden by eliminating unnecessary documentation requirements and redundant requests for information already on file. 
• Establishing technological solutions that can enhance provider-payor communication, streamline administrative processes, and improve care coordination. 
• Implementing telehealth platforms or electronic health record systems that facilitate virtual care and data sharing. 
• Ensuring the provider network expansion adheres to all applicable healthcare regulations and compliance standards. 
• Developing marketing strategies to promote the payor's expanded provider network to members, patients, and the community. 
• Providing ongoing support and consultation to address any challenges that arise between the payor and provider and to foster collaboration and mutual success. 

How Healthcare Payors Can Improve Care and Member Services  

At Creatives On Call, we have over 1,200 subject matter experts focused on the patients, payors, physicians, and providers' experience. We understand the changes transforming these relationships and have completed over 500 strategic marketing and creative initiatives across the healthcare industry since 2020. Our curated engagement teams and specialty resources help healthcare payors improve their operations, meet their KPI targets, and better serve their clients. 

By implementing powerful marketing strategies, incorporating advanced technological solutions, and reducing overall administrative burden, payors can navigate the challenges they face in today’s healthcare landscape and ensure that their members receive high-quality services.  

Dive Brief:

• The American Hospital Association is escalating messaging that site-neutral payments will worsen Medicare hospital outpatient margins as the battle over site-neutral legislation heats up in Washington.
• Along with releasing a new report, the hospital lobby also hosted a briefing on Capitol Hill Monday with hospital executives. They argued that proposals reducing payment rates for hospital outpatient departments would worsen hospitals’ already shaky financial outlook, while jeopardizing care for Medicare and Medicaid patients nationwide.
• The AHA’s stance is in stark contrast with the views of healthcare stakeholders including the CMS and industry watchdogs that support legislation currently being considered by Congress to standardize payments across sites.

Dive Insight:

Under current Medicare payment arrangements, hospital outpatient departments receive higher reimbursement than independent physician offices and ambulatory surgery centers for providing the same low-acuity care. Hospital-owned clinics can also charge additional facility fees to cover what they argue are additional overhead costs, resulting in higher co-pays for patients.

Recently, some lawmakers have reinvigorated efforts to enact site-neutral policies, arguing aligning fee-for-service payment rates across ambulatory settings would drive down patient costs while saving Medicare money. The move has broad support among healthcare stakeholders — but not hospitals, who would see government payments drop as a result.

“Lobbyists are pretty much the only opposition,” Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, testified during a congressional panel in April.

In June, a bipartisan group of senators introduced the Site-based Invoicing and Transparency Enhancement Act that would standardize payments to hospital-owned outpatient sites and physician offices for the same services. Along with lowering out-of-pocket costs, advocates of the bill say it would save taxpayers up to $40 billion over a decade.

However, proposals to reduce hospital outpatient department payments are based on a false assumption that they are currently being overpaid by Medicare, the AHA argues in a report out this week.

Instead, hospitals receive 84 cents for every dollar they spend on Medicare patients, resulting in a negative 17.5% Medicare outpatient margin, according to the report.

The AHA argues that hospital outpatient departments warrant a higher level of Medicare payments, because they tend to see sicker patients and have to comply with more onerous regulations, including 24/7 standby capacity for emergencies.

The hospital lobby also released an infographic on Friday in advance of its Hill briefing showing that health insurers and private equity firms are responsible for the majority of physician acquisitions over the last five years.

Advocates of site-neutral policies say they could remove a financial incentive for hospitals to acquire outpatient offices, bolstering independent physician practices.

As a result, physician groups generally support payment parity regardless of location.

The SITE Act is not the first attempt to lower differences in reimbursement rates between hospital outpatient departments and other providers. In 2021, hospital reimbursements took a hit when the Supreme Court declined to overturn the HHS’s policy that lowered hospital outpatient facility payments for clinic visits.

Dive Brief:

• UnitedHealth has rescinded a plan to require prior authorization for colonoscopies and other endoscopic procedures, following backlash from physician groups.
• UnitedHealth, which operates the biggest private health insurer in the U.S., was set to require prior authorizations for the procedures this week, but announced late Wednesday it was instead enacting an alternative advance notification process.
• Provider groups still slammed the new process, which requires doctors to collect and submit patient data to the insurer before most endoscopic procedures, claiming that it raised documentation requirements on physicians and is a glide path to stricter prior authorization policies.

Dive Insight:

The new advance notification process is the latest development in an ongoing back and forth between UnitedHealth, the parent company of payer UnitedHealthcare, and provider groups over prior authorization.

UnitedHealth was set to enact prior authorization for 61 endoscopy codes starting in June for its more than 27 million commercial beneficiaries. The payer argued the policies would hold physicians to evidence-based practices for clinically appropriate care.

However, after several meetings with provider groups, UnitedHealth agreed to temporarily postpone the prior authorization program in exchange for advance notification. UnitedHealth will run the pilot program collecting data for at least seven months, according to the American Hospital Association, which discussed the policy with UnitedHealth.

In the new program, UnitedHealth requires data in advance of care including member information, requested procedure and diagnosis, referring provider information and rendering provider information and site of service. The payer might also request other details of a patient’s condition or medical history.

The advance notification requirements apply to surveillance, diagnostic and non-emergent colonoscopy, esophagogastroduodenoscopies and capsule endoscopy procedures. They do not apply to screening colonoscopies.

UnitedHealth will not use the data to deny any procedures, and won’t deny any procedures for failure to notify, according to a spokesperson.

However, physicians have to participate in the advance notification process if they want to be considered for UnitedHealthcare’s gold card program, set to begin sometime in 2024. That program will allow certain providers whose prior authorization requests are consistently approved to perform most procedures without needing to get the health plan’s green light.

The AHA said it thinks the advance notification process is a better approach than prior authorization, but other medical groups took a harsher stance against the refocused policy.

The American Society for Gastrointestinal Endoscopy, the American College of Gastroenterology and the American Gastroenterological Association criticized the advance notification process in a meeting with UnitedHealth last week, arguing it requires the same amount of documentation as prior authorization and will have similar repercussions on patient access down the line.

UnitedHealth also hasn’t presented data showing overutilization of colonoscopies or endoscopies to justify the added paperwork, according to the AGA.

“UnitedHealthcare’s slap-dash approach to rolling out a policy that will ultimately control patient access to critical, often life-saving, medical procedures flies in the face of common sense and responsible medical practice,” AGA President Barbara Jung said in a Thursday statement.

The provider groups argue preserving quick access to gastroenterological care is integral, as colorectal cancer is the third most common diagnosed cancer and the second leading cause of cancer-related deaths in the U.S. Rates of colorectal cancer are also rising in younger adults.

UnitedHealth announced it planned to greatly reduce its use of prior authorization earlier this year amid a government push to streamline the policies, before unveiling plans to establish prior authorization for some gastroenterology procedures.

The CMS has instructed arbiters to resume all recent payment dispute determinations relating to the No Surprises Act after the agency was forced to pause determinations following a February federal court ruling.

The agency had previously paused and resumed earlier disputes between payers and providers after a Texas judge ruled a second time against the federal government, saying that the dispute process for the No Surprises Act was unlawful and unfairly favored insurers.

On Friday, the agency said that payment determinations could resume for disputes furnished on or after Oct. 25, 2022. It also announced that the majority of disputes will now appear from an automated agency email address.

The No Surprises Act was enacted in January 2022 in an attempt to protect patients from receiving surprise medical bills, but the payment dispute process set up between payers and providers has faced several lawsuits from provider groups, including the Texas Medical Association, arguing that the process unfairly benefits insurers.

Lawsuits have centered around the guidance directing arbiters to anchor decisions to the median in-network rate for healthcare services, or the qualified payment amount, which is set by insurers.

Texas Judge Jeremy Kernodle had previously ruled to nix the language in the No Surprises Act that instructed arbiters to begin with the qualified payment amount, but ruled again in February that the process still privileged the payment amount, “tilting arbitrations in favor of insurers, and thereby lowering payments to providers.”

Lawsuits have forced the CMS to halt and restart arbitration as it works to incorporate court rulings into its dispute guidance.

Even though the No Surprises Act went into law last year, one in five Americans surveyed in June still reported receiving surprise medical bills.

Dive Brief:

• A second major health insurer is warning investors about higher-than-anticipated outpatient care utilization that could hike medical costs, potentially cutting into profits.
• Humana filed an 8-K with the U.S. Securities and Exchange Commission on Friday morning saying elevated outpatient trends are expected to push its medical loss ratio, a marker of how much payers spend on patient care, toward the high end of its outlook for both the second quarter and the full year.
• UnitedHealth, the parent company of the largest private payer in the U.S., first flagged the trend during its Goldman Sachs’ investor day on Tuesday, sparking a managed care selloff earlier this week. Stocks in large health insurers dipped again slightly on Friday morning following Humana’s filing.

Dive Insight:

Pent-up demand for healthcare delayed during COVID-19 is making a reappearance, pressuring medical costs for health insurers that had a financial windfall during the pandemic. The return of delayed services could once again raise health insurer spending that was suppressed as Americans avoided non-essential medical services during the pandemic.

The 8-K, filed in advance of Humana’s investor meetings, says Humana’s outpatient utilization has been higher than expected in recent weeks, including emergency room visits, outpatient surgeries and dental services. Humana’s inpatient utilization has also been higher than expected, diverging from seasonal patterns — unlike UnitedHealth, which said it wasn’t seeing elevated inpatient utilization.

Higher-than-expected inpatient utilization is notable as inpatient medical care is pricier than outpatient services, so generally has a stronger impact on payers’ medical costs.

“Those [inpatient] comments seem more negative as compared to [UnitedHealth’s] commentary,” SVB Securities analyst Whit Mayo wrote in a note on Humana’s 8-K.

Humana expects to reach the top end of its MLR range of between 86.3% to 87.3% in both the second quarter and through 2023.

Humana didn’t attribute the rising utilization to specific drivers, but UnitedHealth chalked it up to normalizing medical activity after COVID kept seniors away from non-essential care.

“We’re seeing as behaviors kind of normalize across the country in a lot of different ways and mask mandates are dropped, especially in physician offices, we’re seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit,” said Tim Noel, UnitedHealth’s chief executive for Medicare and retirement, during Goldman’s investor conference.

Like UnitedHealth, Humana has also incorporated the higher outpatient trend into its Medicare Advantage bids for 2024 placed early June.

Humana said it expects to offset higher costs through ongoing expense reductions, higher investment income and general business outperformance. The Louisville, Kentucky-based insurer plans to reaffirm its full-year earnings guidance issued earlier this year during its investor meetings.

Humana also noted MA membership growth in the second quarter has been better than preliminary expectations. The growth does include more age-ins, or seniors newly eligible for Medicare, than Humana expected. Those members, as compared to the average new member, generally result in a higher MLR.

Humana — currently the second-largest MA payer after UnitedHealth — has said it expects MA membership to increase 17% in 2023 compared to 2022, higher than expected industry growth. The payer announced earlier this year it would exit the employer insurance business altogether to focus on government programs.

The resurgence in volume is resulting in wary health insurers, but bodes well for hospitals, especially those with a large outpatient footprint like Tenet.

Many providers have struggled financially during the pandemic with low utilization and subsequent loss of revenue, but recent surveys have indicated significant volume growth for hospitals in the second quarter as demand returns and labor shortages ameliorate, freeing up capacity.

One recent analysis found 95% of hospital executives project outpatient volumes will increase this year, and 40% foresaw increases of 10% or higher.

Dive Brief:

• CVS is partnering with Rush University health system in Chicago to coordinate care for Medicare seniors in a new accountable care organization based off CMS’ direct contracting model.
• Under the new partnership, patients getting care at MinuteClinics participating in the ACO REACH model in the Chicago area can get follow-up primary and specialty care with Rush, along with other ACO REACH organizations, CVS said in a release Monday.
• Rush will be the only Chicago-area academic medical center participating in CVS’ first accountable care organization in REACH.

Dive Insight:

The goal of the initiative is to strengthen care coordination for patients in a convenient way, according to Rush CEO Omar Lateef. Medicare patients will be able to get customized support, including home-based care, transportation support for annual wellness visits and cost sharing to help with co-pays.

“This provides another option for patients at a time when access to high-quality health care is more important than ever,” Lateef said in a statement.

The partnership builds on Rush’s experience with the Medicare Shared Savings Program, the biggest accountable care program in the U.S., CVS said. According to Mohamed Diab, the CEO of CVS’ accountable care division, it has the potential to improve longitudinal care for Rush’s population of 35,000 Medicare beneficiaries.

CVS joined ACO REACH in 2022, when the model was still known as direct contracting, and was grandfathered in to participate in REACH for the 2023 plan year. The company, which owns health insurer Aetna, covers beneficiaries in REACH in the states of Florida, Georgia, Illinois, Indiana, Kansas, Missouri, North Carolina and New York.

CVS covers more than 80,000 aligned beneficiaries in ACO REACH across more than 4,000 providers, and more than 800 MinuteClinic locations, according to its website.

The company has said it’s looking to acquire a primary care provider as it looks to create a vertically integrated healthcare giant comprised of a health plan, pharmacy, medical clinics and more. Bloomberg reported earlier this month that CVS is exploring a $10 billion deal to purchase value-based medical group Oak Street Health, though speculation has eased amid reports that the deal wouldn’t make sense for CVS financially.

 

Upcoming Medicaid redeterminations could further complicate healthcare operating environments, as hospitals and payers continue to face pandemic-driven challenges nearly three years into COVID-19, according to a new report from Moody’s Investor Services.

Medicaid enrollment rose substantially through the pandemic, growing from 70.7 million members in February 2020 to 90.9 million in September 2022, according to the report. The growth in enrollment numbers was driven by policies that suspended state Medicaid eligibility checks during the COVID-19 pandemic and barred states from kicking members off their rolls.

The suspension of state eligibility checks benefited both hospitals and payers, with seven Moody’s-rated publicly-traded health insurers reporting large enrollment and EBITDA numbers driven largely by pause, according to the report.

However, Medicaid state redeterminations are currently scheduled to begin in April. About 15 million people are expected to lose coverage as a result over the next two years, according to the HHS.

While about seven million of those people are expected to gain coverage through the individual markets or employer-sponsored plans, eight million will not, and will likely become uninsured.

As a result, the redeterminations are likely to curb hospital revenue and enrollment growth for payers, according to the report. Health insurers’ earnings growth is expected to slide due to sluggish enrollment, while hospitals could see more self-pay patients and “higher bad debt” for facilities.

Commercial insurance enrollment is also likely to slow as corporate layoffs rise. That’s another factor likely to deal a blow to payers, Moody’s said.

Large payers have addressed redetermination concerns along with recent earnings results. On a Wednesday call with investors, Elevance CEO Gail Boudreaux said the payer will work with states to minimize potential coverage losses once redeterminations start again. Elevance has benefited from relaxed eligibility rules, and ended 2022 covering 47.5 million members.

Hospitals also face additional concerns this quarter, Moody’s said.

Staffing shortages remain a primary concern for facilities, though contract labor use has been declining in most markets, according to the report. However, labor expenses — which account for the bulk of hospital expenses — are likely to remain elevated as facilities face rising permanent labor costs.

Staffing and pay concerns among nurses have led to major strikes in the past year, including a recent three-day walkout among 7,000 nurses at two New York hospitals.

Greater union activity is likely to occur in some markets as labor dynamics continue playing out, the Moody’s report said.

Labor shortages have also hurt hospital volumes and are leading to longer lengths of stay as facilities struggle discharging patients to post-acute care settings.

 Some hospitals have acquired or partnered with post-acute care facilities to enhance discharge processes, in line with an ongoing shift toward non-hospital care. That trend should continue disrupting hospital volumes, according to the report. 

Dive Brief:

• Employers and private insurers paid 224% of what Medicare would pay for the same services at the same facilities across all hospital inpatient and outpatient services on average in 2020, according to a Rand study funded by the Robert Wood Johnson Foundation.
• Researchers found significant variations in those prices across states. For instance, Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while other states like Florida, West Virginia and South Carolina had relative prices at or above 310% of Medicare.
• Price variations by state are more attributable to hospital market power than each hospital's share of patients covered by Medicare or Medicaid, according to the report released Tuesday.

Dive Insight:

The findings illustrate just how broadly prices for healthcare services can vary based on a patients’ insurance coverage and which state they receive care in.

Despite recent price transparency regulations designed to help consumers shop around for services, employers that provide most private insurance often don't have usable information on prices negotiated with hospitals on their behalf, researchers wrote.

About 157 million Americans got health coverage through an employer or union in 2020, according to data from the Kaiser Family Foundation.

The latest figures are a slight improvement from Rand’s previous 2018 study, when employers and private insurers paid 247% more on average than Medicare for the same services and the same facilities, according to the report. That’s mostly attributable to a boost in the volume of claims from states with prices below the previous mean price, the researchers said.

For COVID-19 hospitalizations, employers and private insurers paid on average 241% more than what Medicare would pay in 2020, the report, based on claims data from over 4,000 hospitals and over 4,000 ambulatory surgery centers in every state except Maryland, found.

Researchers also found variations between different sites of care.

Looking at five common procedures done in both ambulatory surgical centers and hospital outpatient departments, the average price in the outpatient department was $6,169 while the average ASC price was $2,404.

While commercial prices for ASC services rose slightly faster than Medicare prices over the study period, they remained well below relative prices for the same services in hospital outpatient departments.

Employers and private insurers paid about 162% more than Medicare for common outpatient services done in ambulatory surgery centers.

But if ASCs were paid the same as hospital outpatient departments in Medicare, the prices for those services would have averaged 117% of Medicare payments, the study found.

The American Hospital Association pushed back on the findings, saying “researchers should expect variation in the cost of delivering services across the wide range of U.S. hospitals — from rural critical access hospitals to large academic medical centers,” according to a statement from CEO Rick Pollack.

The AHA also said the report looks at 2.2% of overall hospital spending, and the average price for hospital services declined as Rand added more claims in the latest report compared to past reports. Pollack said in the statement “you simply cannot draw credible conclusions from such a limited and biased set of claims.”

Dive Brief:

• Omada Health is partnering with Intermountain Healthcare’s value-based care unit Castell in the virtual chronic care company’s first care delivery partnership with a major health system.
• The two are linking to offer virtual diabetes care and prevention to Intermountain’s primary care patients in its Utah medical group. Castell will help to target and enroll eligible patients with or at risk for diabetes, giving them the option to enroll in an Omada program, according to a recent release.
• Omada expects to reach “thousands” of known patients in the new partnership, CEO Sean Duffy told Healthcare Dive. Financial terms of the deal have not been disclosed.

Dive Insight:

Omada was founded in 2011 with the goal of targeting care for the tens of millions of adults with chronic care issues, including the 11% of the U.S. population with diabetes.

The company started selling diabetes care management to employers and health plans, but its clinical areas have grown to include hypertension and musculoskeletal issues. Now, with the new partnership, it’s branching out into integrated virtual care with health systems as well.

The extension comes as the pandemic prompted many health systems to accept virtual care. And, as macro forces like inflation and labor shortages continue to pressure operators, hospitals are expected to continue adopting digital tools to streamline operations and care delivery.

Omada’s diabetes programs link member support with intervention from health coaches and medical devices, like continuous glucose monitors, to track progress on metrics like A1C levels in real-time. They also include an individualized care plan that uses behavioral science to encourage patients to make beneficial lifestyle changes.

Intermountain and Omada had a relationship for more than six years before launching its new partnership at the end of 2022, Duffy said. He didn’t share a timeline for the deal, but said he is “looking forward to continuing this partnership to enroll as many patients as possible and keep them engaged for as long as they need.”

In February, Omada closed a $192 million Series E financing round, with Duffy telling Business Insider and other outlets that the company was gearing up for an IPO at the end of 2022. However, the public offering failed to materialize.