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Understanding Hospital Costs – New Tool Makes Data More Transparent and Accessible

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The National Academy for State Health Policy (NASHP) in partnership with the Rice University Baker Institute for Public Policy and Mathematica Policy Research, with support from Arnold Ventures, has developed the Hospital Cost Tool (HCT) to help shed some light on hospital prices and cost.

The HCT identifies different cost measures including hospital revenue, cost to charge ratios, and profitability across more than 4,600 hospitals nationwide from 2011 through 2019. It is interactive, allowing users to examine data for an individual hospital or specific health system, by state or users can compare data across hospitals and states. The tool is based on NASHP’s Hospital Cost Calculator that uses Medicare Cost Report data annually submitted to the federal government by hospitals. Data for 2020 will be added to the tool after more hospitals have completed their reports for that year.

One notable metric within the HCT is hospitals’ breakeven point, which is the amount a commercial health plan would need to reimburse a hospital to cover its expenses. In calculating the breakeven, the tool accounts for a hospital’s operating costs, profit or loss from public coverage programs, charity care and uninsured patient hospital costs, Medicare disallowed costs, and a hospitals other income and expense. Purchasers of care, including states and employers, can compare the breakeven point to the data point showing what commercial payers pay. Depending on the hospital, the breakeven point and what commercial payers reimburse can be significantly different, indicating an opportunity to renegotiate payment rates.

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