A union health fund is urging New York leaders to rein in high prices at private hospitals in a new report that reveals how costs for similar services can vary vastly among medical facilities in the same market.
The 32BJ Health Fund, which covers unionized building workers in 11 states and Washington D.C., said it will spend about $1.3 billion on medical claims this year on behalf of 200,000 members. More than half of that will go to hospitals.
But the fees the union pays to those hospitals vary widely, resulting in what it says are unnecessarily high costs that eat into workers’ wages. 32BJ pays more than triple what Medicare pays at private hospitals for the same services, according to its analysis of medical claims released Thursday.
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Costs for common medical procedures underscore the disparity. The group said it paid $55,000 for cesarean-section deliveries at Montefiore, compared with $30,000 at Mount Sinai Health System and less than $18,000 at the city’s public Health + Hospitals system. A colonoscopy that’s about $10,000 at NewYork-Presbyterian or NYU Langone Health costs half that at Northwell Health or Mount Sinai.
Now the fund wants to do something about it. It’s in discussions with other unions about how they might band together to aggregate their buying power and jointly negotiate with hospitals, as employers in Colorado have done. New York Mayor Eric Adams floated a similar idea as a candidate last year. He said he would force hospitals to be more transparent about costs and bring together unions “to collectively bargain with hospital systems in order to standardize pricing.”
American healthcare markets have long been dysfunctional. Prices for the same thing depend on who’s paying, and can vary substantially for no clear reason. And those costs, determined in private contracts between insurance carriers and hospitals, are often hidden from patients getting the care and even from employers who ultimately pay for much of it.
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“We don’t get a say in what these rates are,” said 32BJ Health Fund Director Cora Opsahl. “We don’t have the ability to see what is being negotiated as the hospital systems are negotiating with the insurance providers.”
Erode Wages
Overall, the prices the fund paid to hospitals in the city increased by 21% from 2016 to 2019, outpacing the rate in neighboring states, according to the report. New York’s hospitals cost the union fund more than similar systems in Boston, where it also has members.
The union health plan is funded by 5,000 employers who jointly bargain with 32BJ members, including doorpersons, cleaners, maintenance workers, security guards and other service workers. In March, the 32BJ union began negotiations for a contract covering 32,000 of its residential building workers that’s set to expire April 20.
The health fund is jointly governed by representatives of the union and management, and the union workers’ healthcare costs are ultimately funded by property owners and management companies. Rising health-care costs are eating away at wages, the health fund says.
In New York City, about 37% of the union’s compensation gain since 2014 has gone to health benefits, outpacing inflation. But if medical expenses had risen at the same rate as inflation instead of higher, union members would earn an additional $5,000 a year in wages, the report estimates. Union members pay no premiums for their health benefits.
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Among health-care purchasers, 32BJ has been unusually aggressive in trying to restrain hospital costs.
The health fund recently removed NewYork-Presbyterian, one of the city’s largest hospital systems, from its network over price disputes. It’s encouraged members to get care from preferred providers through benefit designs that reduce out-of-pocket expenses, and it created a maternity program to steer members to high-quality, lower-cost hospitals for deliveries.
In a statement, NewYork-Presbyterian said, “All New Yorkers deserve the very best care, and we are continually focused on maintaining our patients’ access to the providers they trust.”
Affordability ‘Problem’
It’s also contracted with Mount Sinai directly for services including joint replacements and bariatric surgeries. Mount Sinai is taking a similar approach to work with other groups directly, said Stephen Furia, vice president of population health solutions at the hospital system.
“You have to start by acknowledging that affordability is a problem,” he said. Mount Sinai wants to collaborate with plans like 32BJ to “to try to solve the problem for long-term affordability,” he said.
In its report, the 32BJ Health Fund says it’s reaching the limits of it what it can achieve through benefit design alone. The report suggests lawmakers could more tightly regulate hospital prices and conduct. It also contemplates creating a larger purchasing group with other unions or employers, potentially including the city government.
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Kyle Bragg, president of the 32BJ union, said he’s discussed the effort with Adams since before he won the primary.
“The city and the state are all in the same pot that we’re in,” Bragg said. “They’re paying the same level of prices for procedures.”
In a statement, Adams said he appreciated the work of 32BJ and other unions “to ensure that our city has fair hospital prices.”
Commercial health plans typically pay higher prices than Medicare, the federal healthcare program for seniors, which sets rates. Nationwide, private plans pay hospitals about 250% times Medicare rates, according to a Rand brief last year. But that varied significantly by state. In some states, rates were less than 200% of Medicare, while in others, they were close to 350%.
“We don’t expect to pay Medicare reimbursement,” Bragg said, but paying more than triple Medicare rates, he said, “is just too much.”
