Primary Care

Grantee Name

Gorman Actuarial, Inc.

Funding Area

Primary Care

Publication Date

May 2018

Grant Amount


Grant Date:

June 2014 – February 2017

On both the national and state levels, health care price transparency is gaining momentum.

Uncovering the drivers of health care costs, as was done in a groundbreaking Massachusetts study in 2010, can stimulate a range of reforms to foster competition, the elimination of market distortions, cost containment strategies, and the promotion of transparency. For this project, NYHealth and the New York State Department of Financial Services (DFS) undertook a close collaboration to conduct analysis inspired by the Massachusetts study. NYHealth awarded Gorman Actuarial a grant to perform this research. DFS issued a data request to New York State’s commercial insurers to collect hospital reimbursement data and insurer/hospital contracts. The study analyzed data for 107 hospitals and 9 insurers over 3 study regions in New York State: downstate, Buffalo, and Albany. The report shed light on how prices vary across hospitals, the effects of market share, and opportunities for pro-consumer policies.

Outcomes and Lessons Learned

  • Analyzed how prices vary across hospitals and the effects of consolidation;
  • Examined whether and how geographic location, teaching status, and other hospital attributes influence hospital prices, in addition to market leverage and quality; and
  • Examined contracting practices, price variations, price drivers that impact premiums, and contract provisions that affect the market.

The report drew from exclusive, nonpublic data from health insurers and negotiated contracts with New York State hospitals. Among the key findings spotlighted in the report:

  • There are significant differences in overall price levels among hospitals of similar size, services, and teaching designation, regardless of how sick the patient population is and the complexity of services provided. The highest-priced hospitals are 1.5 to 2.7 times more expensive than the lowest-priced hospitals in the same region.
  • A hospital’s market leverage, or its bargaining power when negotiating with insurers, is a key factor in the prices a hospital can command.
  • Hospitals with higher prices do not necessarily have higher quality. Likewise, hospitals with lower prices do not necessarily have lower quality.
  • Hospitals that are part of a hospital system with a large market share are generally higher-priced as a result of the power of that hospital system in contract negotiations, regardless of the individual hospital’s size or market share.
  • Contract provisions between hospitals and insurers can hinder competition, product innovation, transparency, and cost containment strategies. Some contract provisions prohibit the inclusion of hospital prices in cost-estimator tools for consumers; anti-steering language can limit the information available about high-quality, lower-priced providers.

The report includes actionable recommendations for how policymakers can apply and build on the findings to understand health care costs and slow their growth, including simplifying reimbursement methodologies; barring certain contractual language from hospital/insurer contracts; and monitoring and reporting provider price information to highlight potential market dysfunctions.

The report, “Why Are Hospital Prices Different? An Examination of New York Hospital Reimbursement,” was the subject of an exclusive, front-page article in the Albany Times Union and received widespread media attention, including newspapers in Syracuse and Buffalo and industry press.

The report was shared widely with policymakers and other stakeholders, including State and local legislative officials, professional and trade groups, researchers, advocacy groups, and health care systems. The report helped to inform the New York City’s Office of Labor Relations in its health plan negotiations on behalf of the City’s 1 million employees and their dependents. Similarly, 32BJ SEIU New York, which covers 200,000 property services workers and their dependents in New York City and on Long Island, used the report and its recommendations in its purchasing arrangements with insurers. The State of Pennsylvania subsequently contracted with the report’s study team to conduct a similar study, replicating New York’s work in this area.

The study faced some significant challenges at the outset, including resistance from some insurers and providers. This led to a substantial delay in the data request to carriers, a change in New York-based contracting experts, and delays in carriers responding to the data request. A few carriers delayed their submissions into 2016 and some data submissions were initially incomplete, both of which required extensive follow-up communication with carriers.

Co-Funding and Additional Funds Leveraged: New York State DFS provided $450,000 in direct co-funding for the project.