California hospitals paid 209% of Medicare by private insurers, study finds

Hospitals in California were paid, on average, 209 percent as much as Medicare by private health insurers in 2015-16, according to research firm West Health Policy Center.

The center's analysis of financial data filed by hospitals with the California Office of Statewide Health Planning and Development found that while Medicare paid an average of 79 percent of cost, private insurers paid an average of 165 percent of cost — more than twice as much as Medicare.

Researchers uncovered substantial variation in how hospitals' private insurance payments compared to Medicare reimbursement. Private insurance payments averaged 364 percent of Medicare for the 10 percent of California hospitals with the highest ratio of private to Medicare payments. Comparatively, for the 10 percent with the lowest ratio, average private insurance payments were 89 percent of Medicare.

The 10 hospitals with 300-plus beds that saw the highest ratio of private to Medicare payments included Stanford University Hospital, UC Davis Medical Center in Sacramento and Cedars-Sinai Medical Center in Los Angeles.

The West Health Policy Center offered two perspectives on the results:

"The first perspective is that the ability of hospitals to extract relatively high rates of payment from private insurers reflects market failures stemming from circumstances such as consolidation in the hospital industry, the position of 'must-have' hospitals even in markets where there may appear to be competitors, and the pressure that private insurers face from employers and employees to offer broad networks. The second perspective is that high rates of private payment are needed to offset payment shortfalls from Medicare and Medi-Cal, California's Medicaid program."

For the full report, click here.

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