ORGANIZATION Agency for Healthcare Research and Quality (funding organization) Thomson Reuters PROBLEM OR ISSUE ADDRESSED Hospital administrative data have been used in “cost-effectiveness”, “cost-benefit”, and “burden-of-illness” studies because they contain large numbers of cases for specific conditions and procedures and because charge information is available. While these data generally contain information on how much the facility charged for the hospital stay, they lack information on the cost to provide care and the amount reimbursed for care. In the past, AHRQ developed a set of hospital-level cost-to-charge ratios to estimate the cost of providing care. Currently, AHRQ is piloting a project to create price-to-charge ratios that will be used in conjunction with charge information collected on hospital discharge records to estimate the “price” of inpatient hospital care. In developing price-to-charge ratios, the term “price” reflects the amount that hospitals are paid by insurers and consumers based on payer revenue information for each hospital. This is the amount of revenue that hospitals actually receive, net of any discounts negotiated with insurers. These ratios will be linked to the Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases (SID). The HCUP SID files contain the universe of inpatient discharge abstracts (including information on charges) in participating States, translated into a uniform format to facilitate multi-State comparisons and analyses. Currently, 40 states participate in HCUP, encompassing about 90 percent of all U.S. community hospital discharges. The impetus for this pilot is the President's and Secretary Leavitt's initiatives to make health care information more transparent to consumers. While the addition of price information will help consumers make more informed choices about hospitalizations for themselves and their families, this information will also be valuable for researchers by providing alternatives to measuring resource use that are better suited for their studies. GOALS The short-term goals of this project include: • Explore the feasibility of creating prices for common hospital diagnoses. • Release prices at a state-wide level for four broad payer groups (Medicare, Medicaid, Private, and self-pay) and groupings of conditions. • Increase understanding of pricing differences among payers. • Release the data publicly after some internal validation. The long term goals of this project include: • Develop price-to-charge ratios for all hospitals by payer states using modeling techniques. • Link price-to-charge ratios to the HCUP databases, which currently contain charge information and estimate costs. • Validate estimated prices with data sources such as CMS, Market Scan, • Provide states with information on hospital average prices that can be used to populate a Website where consumers can explore pricing for common diagnoses. • Release prices publicly on additional AHRQ databases, including national databases such as the Nationwide Inpatient Sample (NIS) and Kids' Inpatient Database (KID). OUTCOMES ITEMS USED IN THE DECISION HCUP data have been used in “cost-effectiveness”, “cost-benefit”, and “burden-of-illness” studies because they contain large numbers of cases for specific conditions and procedures and because charge and estimated cost information is available. The addition of estimates prices will provide researchers an additional tool to more effectively conduct their studies. IMPLEMENTATION STRATEGY AHRQ solicited participation of HCUP Partner organizations that have access to hospital revenue information by payer, and are willing to release state-level charge and price information broken out by the four broad payer groups and broad diagnostic categories. Initially, AHRQ is utilizing information from 5 HCUP SID Partner States in conjunction with hospital-specific revenue information to develop prices for hospitalizations. RESULTS This project is on-going and making substantial progress. Five states with the required financial information have been identified. The analytic methods to validate the data have been determined. The plan to create the price-to-charge ratios for these states is in place. An illustrative example of a specific condition or procedure will be provided during the presentation to demonstrate the differences in resource use as measured by “charges,” “costs,” and “prices.” An explanation of what these concepts are capturing will also be presented. LESSONS LEARNED To date, the project the lessons learned include: 1. The number of States that collect financial information by major payers for each hospital are limited. 5 States have been identified that have the detailed information required. As the study moves forward, our objective is to identify 8-10 states with this level of information. 2. While States may collect gross and net revenue information by payer, not all separate these revenues completely for inpatient and outpatient services. Methods will be developed to address this issue. 3. Definitions of revenues and the level of detailed data collection vary considerably among States. These differences will be reconciled.