In this episode, Dr. Eric Barrette of the Health Care Cost Institute discusses and compares price data on local health care markets across the United States.
Mike Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast.
Today, I’m joined by Dr. Eric Barrette who is the Director of Research at the Healthcare Cost Institute. Dr. Barrette’s research is focused on the diffusion and impact of health information technology and geographic variation in medical resource use and prices.
He’s joined us today to discuss a new issue brief and tool from HCCI called the Healthy Marketplace Index.
Dr. Barrette, welcome to the Hospital Finance Podcast.
Dr. Eric Barrette: Thanks! Thanks for having me.
Mike Passanante: So, let’s kick things off. Just to set up the podcast, could you explain what the Healthy Marketplace Index is?
Dr. Eric Barrette: Sure! So, the Healthy Marketplace Index is actually a series of measures or metrics designed to evaluate the economic performance of healthcare finance and delivery.
It was funded with some funding from Robert Wood Johnson Foundation. And if you think of their project, the Healthy County Rankings, it’s similar in concept in that those rankings are a series of measures of population health. These are a series of measures of economic performance related to price utilization, competition, productivity. And hopefully, it’s going to be useful in a similar way that the County Health Rankings are being used in a lot of ways today.
Mike Passanante: Great! So, let’s talk a little bit about the issue brief. Could you briefly talk about the data set you used in your analysis and the factors you looked at?
Dr. Eric Barrette: Yeah. So, all of the metrics that we developed, the ones that were in the first issue brief and the ones that will be in the issue briefs that follow over the next few weeks were developed with the HCCI research data. The data set includes three large insurers, United, Aetna and Humana, who provide us all of their health insurance claims data which include the allowed amounts or the actual amounts that the insurers pay the providers.
The dataset is HIPAA-compliant, so all the patients are de-identified. The providers are actually de-identified too. So we can distinguish between providers or patients, but we don’t know who’s who. And also, it’s important to note, the insurers’ identities are masked. And we can’t even distinguish between different insurers in the data. So we just see one large data set.
But within that, because we have some member demographics—age, gender and location—as well as all their claims for all of their medical services that were reimbursed through insurance, we can do studies like this.
We focused on the 0 to 64 age group of individuals that had employer-sponsored insurance. And then, we limited the analysis to where the HCCI data accounted for approximately 20% or more of the total employer-sponsored insurance population just to ensure that we had sufficient sample sizes for doing the calculations.
And then, after that, the first issue brief we calculated a series of price indices. So what we did was we created a bundle of the most common services based on all of the data we were using for the study. So, for example, an in-patient hospital setting, we found the 100 most common DRGs, and then calculated a weighted average price for the whole sample within each area that we studied.
And by doing that, and calculating the weighted average off of a single set or you might say like a basket of goods, we removed any influence of differences in utilization. So, what we were doing was we were looking at just differences in prices this way.
And we did that for 61 CBSAs which are core-based statistical areas. They’re sort of defined by or used by the Census Bureau. You could think of them as metro areas. So there’s a core metro area and the surrounding areas. It’s based on where people live and work.
Mike Passanante: Excellent! So, let’s talk about your major findings.
First, you noted that from 2012 to 2014, the prices for in-patient, out-patient and physician services all increased. But there are some nuances there. Can you talk about them?
Dr. Eric Barrette: Definitely! So, you’re absolutely correct. All the prices have been going up over this period, 2012 to 2014. But they’re going up at different rates. And I think that this is the first I guess theme that comes out of our report, is that when people talk about healthcare prices, it’s important to note that there isn’t just one price for healthcare.
So, looking just at the difference between the different types of prices, in-patient and outpatient or physician prices, in-patient prices rose pretty steadily one year to the next.
And physician prices increased the least. And actually, they barely increased at all between ’12 and ’13 in our data and just slightly the following year.
And then, the biggest increase was out-patient prices.
So, our report was really designed to identify these types of trends. We didn’t go the step further to try and figure out why this might be going on. Our thought is that it’s more important to get this information out.
And then, us as well as other people that have access to data or interest in these types of things can dig a little deeper. But there’s probably more to be done in terms of trying to understand what’s going on in the markets. But I think the nuances you’re talking about here are just that there are differences between service category types.
Mike Passanante: And to that point, you also found substantial variations within the service categories. What did you find there?
Dr. Eric Barrette: Yeah. So, as I’ve mentioned earlier, we looked across 61 metro areas. And there’s a wide range.
So, the way we calculated index, everything is sort of relative to the sample average or a national average, so we can say prices in one area—I’m actually in Milwaukee right now. So I can say, “Prices in Milwaukee were x percent below the national average or above the national average.”
And what we found is that there is a range, from 35% to 40% below average in some cases on the more extreme to 60%-something above average on the most extreme on the other side. So, in-patient, out-patient, and physician all had a large range like this as well.
So, although they all had a big range, the distributions of prices did differ slightly, getting back to my earlier point that there’s differences between these service categories not just in how their prices change over time, but how, in a given year, the prices are distributed over the same sets of metro areas.
Mike Passanante: And it looks like in-patient and out-patient prices tended to move together while physician prices didn’t follow in the same way. You alluded to that earlier. Any thoughts on why that may be?
Dr. Eric Barrette: Yeah, I have a couple—again, none had been really thoroughly tested. But in a lot of instances, out-patient facility services are provided by facilities that are associated with a hospital system. So, if we’re thinking about how prices are being set and being negotiated with insurers, in many cases—not all, but many times—in-patient, out-patient prices are related just because the hospital system is working out their prices across all of their services and in all of the ways that they can provide that.
And more generally than that, facility prices, one is in-patient, one is out-patient, but they’re both facility-based prices which is to say that those are more similar than physician prices are to any type of facility pricing.
So, I think there are potentially a couple things going on. But I wasn’t surprised to see the relationship between those and less between physician prices. It’s just a little bit unclear at this point just because we haven’t really looked at what the exact mechanism is that’s tying the two together.
Mike Passanante: This is certainly an interesting issue brief and I think forwards the discussion along. It gives us all some things to think about.
If our listeners would like to find out more about HCCI or get a copy of the issue brief, where can they go?
Dr. Eric Barrette: Sure! They can go to our website. All of the reports—this one and all the other HCCI reports including the forthcoming HMI briefs—are available on our website at www.HealthCostInstitute.org.
There’s actually a special section just for the HMI briefs. That also has an interactive map, so you can change the years of the study and see how the different HMI metrics compare over time across the country. Visually, you can see what’s above average, what’s below average.
But like I said before, all the other briefs, we also have up there. So yeah, I encourage people to use the briefs, and hopefully, do a follow-on research to help understand a little better what’s going on in healthcare markets.
Mike Passanante: Dr. Eric Barrette, thanks for spending some time with us today on the Hospital Finance Podcast.
Dr. Eric Barrette: Thanks for having me.