Understanding Hospital Costs: New Online Dashboard Helps States and Employers Contain Health Care Spending Growth

Understanding Hospital Costs: New Online Dashboard Helps States and Employers Contain Health Care Spending Growth

Apr 05, 2022
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For most Americans, hospital costs are a frustrating black box. Increasing hospital prices are one of the biggest drivers of rising health care spending for Americans with employer-sponsored insurance. Even state agencies and large employers with considerable purchasing power are often constrained in price negotiation with hospitals, because of how little they know about each hospital’s cost for providing patient services. In addition, health care purchasers lack reliable information on how their hospital payments compare with Medicare.

The Hospital Cost Tool (HCT), a new dashboard designed in partnership with the National Academy for State Health Policy (NASHP) and Mathematica, helps bridge the information gaps. The dashboard provides state regulators, employers, providers, and researchers with rich data points and intuitive visualizations to analyze hospital costs. The dashboard reports on key metrics, such as hospital revenue, net income, profit margins, cost-to-charge ratio, payer mixes, break-even point (when a hospital’s revenue covers costs with zero profit or loss), and prices paid to hospitals by commercial payers from the RAND Hospital Price Transparency Studies.

“For state health agencies needing to contain health cost growth, the HCT can be a useful tool to start the conversation,” said Sule Gerovich, a senior fellow at Mathematica. “For example, states can use HCT to assess hospital costs and payer-mix, thereby negotiating rates that balance cost-saving and hospital financial viability. States interested in fixed-prospective budget models can also use HCT to inform hospital global budget parameters with Medicaid and commercial payers.”

“Although Medicare Cost Report data is public information, NASHP’s HCT makes the information much more accessible and powerful. It compiles many years of data into one database that enables trend analysis and provides aggregate-level information that allows quick analysis of state or national trends,” added Evelyn Li, a senior health researcher at Mathematica.

NASHP developed the underlying HCT data set using the national Healthcare Cost Report Information System as the main data source. The data set, free for download from the HCT website, covers more than 4,600 hospitals nationwide from 2011 through 2019.

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