Commercial healthcare prices in metro areas are rising while usage is falling, according to a new analysis.
Prices increased 13% as utilization dropped 17% from 2012 to 2016, a new of the Health Care Cost Institute's analysis of more than 1.8 billion commercial claims revealed. Metro areas with higher prices tended to have lower use, and vice versa, HCCI researchers found.
The report reinforces significant price variation for common medical procedures that contributes to rising U.S. healthcare spending.
"That fact that you could be paying 2.5 times more for the same healthcare services in San Jose (Calif.) than in Baltimore (Md.) suggests there is a lot of variation in prices across the country," said Bill Johnson, lead author of the report and senior researcher at HCCI.
Baltimore had the lowest overall prices in 2016 at 26% below the national median and the highest overall use. San Francisco and Green Bay, Wis., on the other hand, had some of the highest prices and below average utilization.
Most metro prices ranged from 25% below the national median to 30% above the national median. But several major outliers had dramatically higher prices than the national median: San Jose at 82%, Anchorage, Alaska also at 82% and San Francisco at 64%.
Usage varied widely, ranging from 55% below the national median in Riverside, Calif., to 34% higher in Baltimore.
Prices increased from 2012 to 2016 in each of 112 metro areas studied, except for Durham, N.C., where prices dropped 6%. Prices rose in New York, Tampa (Fla.), Atlanta (Ga.), Las Vegas and San Antonio by at least 20%.
The report separated inpatient, outpatient and clinician services. Some metros had consistently high or low prices across all categories, while others had outlier price levels for a particular sector.
While the report didn't pinpoint what causes the variation in price, market concentration, payer mix, wasteful spending, cost of living, demand for services and practice patterns are related, researchers said.
States have employed or are exploring different strategies to rein in spending through price caps, global budgeting that pays the hospitals a fixed monthly total for all healthcare services delivered, reference-pricing models, site-neutral payments and aligning incentive-based referral networks.
Targeted policy fixes related to certain markets or services would likely be more effective than broader policy changes, researchers said.
"The report suggests that the variation is more likely related to local problems in each area, which would likely be better addressed individually," Johnson said.