The Payer Spread Index
Unveiling the Payer-Spread Index: How to Unlock Millions in Hidden Hospital Revenue
Discover how a simple ratio exposes an average 48% price gap on common inpatient services, and learn how your health system can turn transparency into profit.
For a 500-bed hospital operating at 65% occupancy with a 5-day average length of stay (≈24,000 annual DRG admissions), if our 12 target DRGs represent about 25% of those cases (~6,000 stays) and the average four-market PSI is 1.48× (a 48% gap), the potential revenue uplift by aligning your lowest-paid contracts with your highest-paid benchmarks is around $43 million per year.
Hidden Gaps in Plain Sight
Commercial payer contracts have long been shrouded in confidentiality. Hospitals saw only their own rates; payers saw only theirs. With the federal price-transparency rule and Trek Health’s Pricing Transparency platform, those secret agreements are exposed—showing that insurers pay, on average, 48% more for the same inpatient DRG at the same hospital, varying by market.
Introducing the Payer-Spread Index
We distilled these disparities into one clear metric:
PSI = (Highest negotiated commercial rate) ÷ (Lowest negotiated commercial rate) for the same inpatient DRG at the same hospital.
- PSI = 1.0× → perfect parity
- PSI = 1.48× → average four-market spread (48% gap)
- PSI > 2.0× → top payer pays twice what bottom payer does
How We Measured It
Using Trek Health’s Pricing Transparency platform, we analyzed CMS commercial rate files in Chicago, Los Angeles, New York, and Atlanta, focusing on 12 high-impact DRGs:
- Orthopedics: Joint replacement (470)
- Medicine: Heart failure (291–293), pneumonia (195), sepsis (871)
- Neuroscience: Spinal fusion (460), stroke with thrombolysis (061)
- Obstetrics/Neonatal: Newborn delivery (775), nutritional disorders (649)
- GI & Behavioral: GI hemorrhage (379), inpatient psychoses (885)
For each hospital–DRG, the platform pulls every insurer’s negotiated rate, computes the highest-to-lowest ratio, and surfaces the PSI instantly.
What We Found: Market Snapshots
Why It Matters
These hidden spreads represent real, recurring revenue:
- Strategic uplift: Closing a 48% gap on 6,000 cases can add $43 million annually.
- Negotiation leverage: “Insurer X pays 40% less than Insurer Y for the same DRG—let's fix that.”
- Focused action: Target the highest-PSI DRGs and payers in your next contract cycle.
Take Action with Trek Health
Transparency isn’t just compliance—it’s a competitive edge. Trek Health transforms opaque rate files into actionable intelligence. Ready to:
- Calculate your hospital’s Payer-Spread Index,
- Benchmark it against peers, and
Negotiate more equitable, profitable contracts— connect with the Trek Health team today. Harness the power of transparency to drive smarter decisions and maximize revenue.
