Medicare Reference-Based Pricing
Many cost reduction strategies have been implemented and tested to address rising health care costs both locally and nationally. One strategy in particular – negotiating rates using Medicare payments as a reference – has proven effective in reducing health care spending, especially for large employers. This analysis shows commercial health insurance payments for facilities (including hospitals and free standing ambulatory surgical centers) for inpatient (IP) and outpatient (OP) services as a percent of Medicare, along with geographic comparisons and percent change from 2019.
- Percent Medicare payments reflect the percent above or below Medicare Fee-for-Service payments (equal to 100%) that were paid by commercial health insurance companies and patients (also known as total allowed amount).
- A facility with 100% Medicare means that they were paid the same by commercial payers as what Medicare would have paid. A 500% result means that the facility was paid 5 times what Medicare would have paid. Similarly, a 75% result means that the facility was paid 75% of what Medicare would have paid for similar services.
- A null value in % Medicare means there was not enough claims data available to produce a result.
The Division of Insurance Region comparison includes all facilities in the region where the facility is located, including the facility itself, and the county comparison includes all facilities in the county where the facility is located, including the facility itself.
Use Cases
- Comparing percent Medicare information across facilities can help consumers understand how payments vary for health care services. Our Shop for Care tool can also be used to see procedure specific prices.
- Use the data to see how your prices compare and to negotiate rates based on what Medicare would pay for services. Peak Health Alliance uses Medicare reference-based price data with hospitals and has achieved lower premiums as a result.
- Use this information to understand how your payments compare to Medicare and to your peers, and to find referral options.
- Use this information to understand payment variation and identify ways to make health care more affordable.
- Use this information to understand payment variation and identify ways to make health care more affordable and high value.
- Study price variation between hospitals and facilities and year over year changes.