Cash prices frequently undercut insurance rates at Texas hospitals, study finds
A study looking at healthcare pricing at Texas hospitals found that paying cash for services is typically a lot cheaper than the typical negotiated rate charged to insurance companies, calling into question the practicality of transparency regulations.
The research was conducted by market intelligence firm Trilliant Health, which based its analysis on reported rates coming from 327 hospitals in the state. Zooming in on 79 common procedures, the data revealed that four times out of five, the patients who paid cash received a discount larger than insurance companies were able to negotiate for reimbursement.
The federal government has pushed for transparency on service pricing. For example, a 2021 rule from the Centers for Medicare & Medicaid Services (CMS) that required the prices of “shoppable” services be prominently displayed. A machine-readable file containing all prices for common services—including cash and negotiated prices—also must be available.
However, the law does not standardize prices. Trilliant noted that healthcare is at odds with all other industries, because prices are locked into brackets determined by a person’s ability to pay, not the services themselves. So for those who are insured by their employer, costs will always be fundamentally different when compared to those paying strictly out of pocket.
“In every industry in which consumers have benefited from price transparency, like airline travel, information is made available in advance of the transaction,” the organization wrote in its report.
“To date, health plan price transparency is utilized like pricing in airport retail shops, where the traveler can compare the cost of a $5 bottle of water and a $6 cup of coffee,” it added.
The data on hospital price transparency is publicly available, and Trilliant said it’s “normalized and aggregated” information on over 5,000 hospitals across the country. However, despite data on uninsured-vs-insured cost discrepancy being readily available, it’s not reaching employers—leaving benefit plans to bear the brunt of the additional costs associated with medical coverage.
“Until hospitals, insurers and policymakers close the gap between data availability and decision-making utility—ensuring that comparative pricing information reaches patients and employers before they need it—transparency regulations will remain a theoretical tool rather than a practical solution for the Americans whose financial well-being increasingly depends on making informed healthcare decisions,” the data analytics firm wrote.
The group also questioned the logic of hospital price transparency altogether, considering 50% of all hospital admissions are unplanned, as a result of emergencies. Unsurprisingly, most emergency patients are unaware of their diagnosis, thus unable to take advantage of their consumer right to shop around for the ER with the cheapest price.
“Even for truly shoppable services where patients theoretically have time and options to compare prices, the complexity of understanding how deductibles, copays, coinsurance and out-of-pocket maximums interact with both cash and negotiated rates creates cognitive barriers that prevent informed decision-making,” Trilliant noted.
Everything is bigger in Texas
As an example of huge cash price discounts seen in Texas hospitals, colonoscopies of the same code were 32% cheaper if patients paid in greenbacks, compared to the median negotiated rate. But what makes that possible is a de facto subsidy from employer-sponsored health plans, who are paying more for the same service.
Trilliant said this logically extends to high-deductible plans, specifically those where patients are responsible for the full cost of care until one is met. Patients in that case are paying an insured rate, despite effectively paying in cash. On top of that, monthly premiums shared between the employer and patients based on individual circumstances, raise the overall price tag more for those lucky enough to have medical coverage.
Another example mentioned in the report was left heart catheterization for diagnostic purposes. At Texas hospitals, negotiated rates across 138 hospitals from 208 health plans had a median cost of $9,773 per procedure. If paying cash, that number drops to $5,499.
For more, read the full study by clicking here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.