Massachusetts health insurers and employers say new regulations are needed to narrow the wide variation in prices charged by hospitals for the same services, arguing that the disparities here are bigger than in other parts of the country.
In a new report, a consultant for the Massachusetts Association of Health Plans said market-based solutions haven’t been enough, and that temporary regulatory fixes, including payment rate caps, could help. The hospital industry objects to such an approach.
Some hospitals in the state have long charged more than others for common services such as joint replacements and maternity care, a trend documented in studies from the attorney general’s office and state Health Policy Commission. The gap drives up health spending because the most expensive hospitals tend to be highly ranked and attract the most patients. Meanwhile, lower-paid community hospitals struggle to compete.
“Not only do we have price variation — it’s greater than in other states,’’ said Lora Pellegrini, president of the insurers group. “We do think a short-term government intervention may be necessary so we can stabilize the lowest-paid providers in the community.’’
Three employer groups also signed on to that recommendation: Associated Industries of Massachusetts, the Retailers Association of Massachusetts, and the National Federation of Independent Business.
Insurers and employers have long been at odds with hospitals over the costs of medical care. The latest venue for the dispute is a commission created to tackle the price-variation issue. The panel — whose members include hospitals, insurers, employers, and public officials — is due to issue recommendations by mid-March.
Pellegrini, a member of that body, acknowledged it was not likely to embrace her call for regulation. Short of regulation, insurers are asking for more power to negotiate new types of contracts with hospitals, such as tiered-network plans, which charge patients more to use higher-priced hospitals.
The report from Newton consultant John Freedman compared reported health care price variations in Massachusetts to two national studies and to reports from New York, Rhode Island, and Vermont. The highest-priced hospitals in Massachusetts are 2.5 to 3.4 times more expensive than the state’s lowest-priced hospitals, one of the biggest differentials in the country, Freedman said.
But the president of the Massachusetts Health & Hospital Association, Lynn Nicholas, said the analysis was based on incomplete and misleading data. Among other problems, it compared Massachusetts to states with which it shares few characteristics, she said.
“It’s entirely erroneous,’’ Nicholas said. “Others have looked at this issue and concluded that price variation exists in all states and is no less and no worse here.’’
Hospitals do not favor rate regulation or price-setting, she added: “We are strongly opposed to that.’’
The Health Policy Commission, a watchdog agency that monitors health care costs, has not done a detailed study on how price variations in Massachusetts compare to those in other states. But in 2015, it said that “Massachusetts is not alone in having substantial variation in provider prices.’’
Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.