Key article takeaways
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Average prices for health services vary significantly. For common elective surgeries, costs differ widely across regions, facilities, and providers.
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Transparency rules have not narrowed the gap. Medicare rates function as a floor for commercial rate setting and pricing continues to be driven by local regulatory environments and market power.
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Changing settings does not guarantee lower prices. For most markets, the average price for providers in the ambulatory setting was many multiples above the Medicare rates for the market.
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MarketScan commercial claims provide outstanding benchmarks. Using actual allowed amount enables organizations to identify price variation and set realistic rate parameters for negotiations.
Why price variation remains a challenge
Price variation in U.S. healthcare is a long-standing phenomenon where patients pay more for health services based solely on the city in which they live and the negotiating power of their payers and providers. It persists despite care shifting from the inpatient to outpatient and ambulatory surgery center (ASC) settings, transparency initiatives, and regulations aimed to curb prices.
How Lantern and MarketScan analyzed elective surgery trends
Lantern Specialty Health worked with MarketScan experts who used MarketScan’s nationally representative commercial claims data to evaluate price variation for six common elective surgeries (knee replacement, hip replacement, knee meniscectomy, lap sleeve gastrectomy, cervical disc fusion, gallbladder removal) from 2021–2023, across 10 diverse metropolitan areas representing 25% of the U.S. population.
MarketScan data includes actual allowed amount paid, which gives real-world commercial price rates across settings and providers.
The analysis looked at variation of price for the surgeries and examined the following components of overall price:
What the data revealed
Outpatient still dominates, but regulation shapes site of care mix
Two-thirds of surgeries occurred in outpatient hospital settings, while ASCs accounted for nearly one-third. Markets with limited or no certificate of need (CON) requirements saw higher ASC use, while markets with restrictive CON rules showed more mixed distributions.
Commercial rates vary dramatically by market
In all surgeries, New York was the market leader in reimbursement rate for DRG, outpatient facility rate, and anesthesiology rate, while Chicago and Dallas, remained lower relative to Medicare, which is statutorily required to be the lowest price payer. These differences highlight the persistent influence of payor and provider market power.
ASC pricing is not always the cheaper alternative
While ASCs are viewed as cost saving settings, this analysis showed substantial price variation with Minneapolis and Phoenix having ASC physician rates above 1,000% of Medicare for certain procedures. This reinforces that site of care shifts do not guarantee savings without considering market dynamics.
Anesthesia costs are uniformly high
Anesthesia fees were elevated across all settings, often several multiples of Medicare. Even lower cost MSAs saw commercial anesthesia reimbursement far above Medicare averages.
Implant fees were rarely in claims
Few surgeries reported implant codes in their closed-claims MarketScan claims data. As these are complicated devices made of expensive materials, implant costs are not reported separately in the administrative claims.
Why this matters
Wide geographic price variation underscores the need for local, data-driven decision making. The study suggests:
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Market power, not just clinical complexity, continues to drive pricing
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Transparency rules have not eliminated variation
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Less intensive settings do not automatically produce lower costs
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Closed claims data is essential to identify true benchmarks and outliers.
Using the granular insights from MarketScan, organizations can gain a full picture of actual price for health services and uncover the impact of their local regulatory environment and possible underlying market dynamics.
The bottom line
Price variation by site of care is real, persistent, and highly localized. Understanding these nuances is critical. Claims-based insights like those from MarketScan offer a clear path to quantifying actual price for a market and identifying components of substantial variation.
Want to learn more about how the MarketScan research databases can help you understand prices? Reach out to our team today.
