Brown University researchers also found patients could have realized up to $213.4 million in savings
for out-of-pocket expenses in 2022
NEW YORK – February 11, 2025 – Historically, Medicare and commercial insurance plans have paid higher rates for services performed in hospital outpatient departments than those delivered in non-hospital settings. Hospital systems are increasingly acquiring physician practices and charging hospital-based prices for routine services previously performed in doctors’ offices or ambulatory surgery centers. If commercial payments for these routine procedures were capped at 150% of Medicare, New Yorkers could have saved $1.14 billion in 2022 from these services, which is almost 20% of total statewide revenue. These are among the findings of research from Brown University School of Public Health’s Center for Advancing Health Policy through Research.
Commissioned by 32BJ Labor Industry Cooperation Fund (LICF), which is dedicated to containing healthcare costs for members of 32BJ SEIU and employers in New York and surrounding areas, the study examined the potential financial impact of the Fair Pricing Act (S705/A2140). The legislation would establish site-neutral payment in New York by capping the prices for routine healthcare services, like x-rays, magnetic resonance imaging (MRIs), and immunizations, at the prices paid in the lowest cost setting, to ensure that routine services do not cost New Yorkers arbitrarily high prices as a result of hospital market power and healthcare consolidation.
“Site-of-care payment differences have fueled increased healthcare spending and contributed to the growing trend of hospital acquisition of physician practices,” said lead study author Christopher Whaley, PhD, an associate professor in the Department of Health Services, Policy and Practice at the Brown University School of Public Health. “Establishing a payment cap is an innovative example of how employers and government institutions can take meaningful steps to control hospital prices and spending without adversely affecting patient access to care.”
Additional key findings
- Potential consumer out-of-pocket savings from the Fair Pricing Act: Applying a cap of 150% of the Medicare non-hospital rate to commercial payments could have also saved New Yorkers anywhere from $168.9 million to $213.4 million in lower out-of-pocket expenses.
- Higher Prices in Hospital Settings: In 2022, commercial prices for routine services performed in hospitals were significantly higher than in non-hospital settings. For example, the average price for services performed in a hospital was 4.2 times higher than in doctors’ offices for certain low-complexity services.
- Regional Price Variability: In certain regions of the state hospital outpatient price markups for routine services are particularly pronounced such as in North County and Mohawk Valley where routine services were 725% and 678% of Medicare office rates, respectively.
- State Budgetary Benefits: The Fair Pricing Act would also benefit state and city budgets by reducing spending on healthcare for government employees, retirees, and their dependents. For example, the New York City Health Benefits Program and New York State Health Insurance Program could have saved a combined total of $228.2 million in 2022 under a 150% cap.
“This research shows that a common sense approach to put money back into people’s pockets is to reduce hospital prices for routine medical services,” said Manny Pastreich, president of 32BJ SEIU. “It’s unfair and unjustifiable for a basic medical procedure to cost more just because a hospital owns the building where it’s performed and this independently verifiable data confirms that these kinds of pricing practices come at a hefty cost to patients, employers, and government.”
Methodology
The analysis is based on 2022 commercial claims data from the Health Care Cost Institute (HCCI), which aggregates data from major health insurers in the US, including Aetna, Humana, Kaiser Permanente, and Blue Cross and Blue Shield plans. This dataset represents approximately 30% of the commercially insured population in New York State and includes 17.2 million outpatient and professional claims for 2,561 procedures identified by MedPAC as suitable for safe delivery in non-hospital settings. Additionally, data was incorporated from the Medicare Physician Fee Schedule and the Medicare Ambulatory Surgery Center payment system to calculate Medicare-equivalent payments for each procedure.
“By capping higher hospital prices for routine services to better align with lower doctor’s office rates we can see how impactful legislation like this can be for our members and all employers,” said Cora Opsahl, director, 32BJ Health Fund. “This data offers insight as to how powerful the site neutral legislation can be to level the playing field for healthcare purchasing decisions and to quantify the potential savings.”
Access the full report: Estimating Savings from the Fair Pricing Act and Commercial Site-Neutral Payments in New York State.
Paying more than $1.5 billion in claims annually, 32BJ Health Fund is one of the largest self-insured funds in New York State, providing benefits for more than 210,000 covered lives (union members of SEIU 32BJ and their families), with contributions from 5,000+ employers, ranging from small businesses to global real estate firms across 12 states. The Fund is a self-insured health plan, which means the cost of high-priced care is directly paid from the accumulated funds contributed on behalf of workers. The Fund has no profits or shareholders and is solely focused on providing workers with the highest quality healthcare it can afford.
About 32BJ Labor Industry Cooperation Trust Fund
The 32BJ Labor Industry Cooperation Trust Fund (LICF) is dedicated to containing healthcare costs, including healthcare pricing, for 32BJ members and employers in New York City and surrounding areas. The leading cause of skyrocketing healthcare costs for individuals, employers, and other payers is uncontrolled and irrational hospital pricing, which is not linked to higher quality. To address, LICF is leading the clarion call for hospital price transparency and accountability by dedicating resources to effect policy and other changes that lower healthcare costs. With the 32BJ Health Fund, LICF is committed to sustaining easy access to high-quality and lower-cost healthcare for 200,000+ union members and their families. Learn more: 32BJHealthInsights
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Media contact:
Cary Conway
