ROCHESTER \u2014 Mayo Clinic charged admitted patients on private insurance more than twice as much as Medicare patients in 2022, according to a <\/p>\n
RAND study from 2024<\/a><\/p>\n on hospital pricing.<\/p>\n For outpatient services \u2014 procedures that don\u2019t involve an overnight stay \u2014 the world-renowned hospital system based in southeastern Minnesota charged over four times as much for privately insured patients compared to patients with Medicare, which is the government health insurance program for the elderly. <\/p>\n That was the case when those patients were the same age, just as sick, and received the same services.<\/p>\n Mayo stands out \u2014 ranking 1st in the state and 5th in the country for what it charges private insurance compared to Medicare for outpatient services \u2014 but the vast gap reflects a growing trend nationwide that continues to today: <\/p>\n Hospital prices are rising far faster<\/a><\/p>\n for private insurance compared to Medicare.<\/p>\n Closely following Mayo in that ranking was Sutter Health, the California health giant looking to acquire Minnesota-based Allina Health. At Sutter, privately insured outpatient services cost over four times as much as services insured through Medicare. Allina Health, smaller than Sutter but still a large health system, charged private insurance around twice as much as Medicare, more in line with the national average.<\/p>\n Policymakers, including in Minnesota, have become increasingly focused on figuring out how to rein in hospital prices. A working group at the state Department of Health\u2019s Center for Health Care Affordability <\/p>\n reviewed findings from the RAND study<\/a><\/p>\n this month as they seek to address rising healthcare costs that affect millions of Minnesotans.<\/p>\n Though the data comes from 2022, there has been no policy change in the past four years that would lead Medicare and private insurance prices to diverge significantly. Staff at the Minnesota Department of Health\u2019s <\/p>\n economics program<\/a><\/p>\n see the study\u2019s use of Minnesota data as providing \u201cthe best picture yet\u201d of the state\u2019s healthcare marketplace, a department spokesperson said in an email.<\/p>\n The majority of Americans are <\/p>\n privately insured,<\/a><\/p>\n often through employment-based health plans. Rising privately insured hospital prices are more opaque than taxpayer-funded budget lines for Medicare and Medicaid \u2014 in part because much of the cost is paid by insurance companies before reaching patients \u2014 but they drive up costs for Americans through higher out-of-pocket payments and lower wages when employers pay more for insurance coverage.<\/p>\n Indeed, many health economics experts agree that high hospital prices are a key driver of America\u2019s healthcare affordability woes \u2014 and a lot of that has to do with high negotiated prices for privately insured patients by growing hospital systems.<\/p>\n In a <\/p>\n New York Times opinion article,<\/a><\/p>\n Zack Cooper, an associate professor at Yale\u2019s School of Public Health, wrote that people are quick to blame health insurance companies for charging high premiums and denying care, but that hospitals and their ever-increasing market power are more the culprit:<\/p>\n \u201cWhen a hospital merges and its prices go up, the harms \u2014 slower overall economic growth and job losses outside the hospital sector \u2014 are real but diffuse,\u201d Cooper wrote.<\/p>\n Erin Fuse Brown, a professor at Brown\u2019s School of Public Health, gave a similar diagnosis: \u201cUnaffordability in health care is driven primarily by price increases, particularly the prices we\u2019re paying for services in the private insurance market,\u201d she wrote in an email to the Reformer.<\/p>\n Private health insurers pay hospitals through a notoriously opaque contract negotiation process impacted by factors like how much bargaining power an insurer or hospital has through being big or well-known. Both hospitals and insurers have become increasingly consolidated, in part to get more negotiating power when haggling over prices. <\/p>\n In two settled lawsuits, Sutter Health has been accused of using its expansive network to ratchet up prices through anti-competitive behavior. Sutter denied wrongdoing in the settlements.<\/p>\n Medicare, on the other hand, sets prices based on federal statute. Medicare prices still vary to account for local variation in wages and whether a hospital is a teaching hospital or treats low-income and uninsured patients, but its rates are more stable overall.<\/p>\n Prices for outpatient services vary more than inpatient, because that\u2019s where health systems are often using new technologies or performing new procedures, said Christopher Whaley, a researcher on the RAND study.<\/p>\n The study used data from Minnesota\u2019s <\/p>\n All Payer Claims Database,<\/a><\/p>\n as well as similar databases from a handful of other states, to compare Medicare and private insurance prices for different hospital systems.<\/p>\n For states without appropriate claims databases, such as California, the study used data from self-insured employers and health plans that chose to participate. Across the country, the study captured a 6% sample of commercial insurance hospital spending.<\/p>\n Mayo gets paid higher rates by Medicare in part because its flagship Rochester hospital is a teaching hospital \u2014 but that doesn\u2019t account for how much higher its private insurance prices are compared to Medicare, or compared to other hospitals\u2019 prices.<\/p>\n \u201cMayo Clinic is a world-renowned facility and has a lot of bargaining power when they\u2019re negotiating with insurers just based on that reputation, and so that just gives them an ability to command higher prices in negotiations,\u201d Whaley said.<\/p>\n Whether those high prices pay for better care is, in general, unclear. The study included an analysis of prices compared to quality, as represented by Centers for Medicare and Medicaid Services\u2019 hospital star rating system, and found that higher prices don\u2019t seem to correspond to higher quality \u2014 instead, there was a positive correlation between higher prices and a hospital\u2019s market power.<\/p>\n That\u2019s true in Minnesota, where there\u2019s a lack of association between hospital prices and quality.<\/p>\n The study authors qualified their non-result on quality and price, saying that CMS\u2019 star ratings don\u2019t capture everything patients care about.<\/p>\n \u201cFor some specialized hospitals, such as Mayo, they could be doing services that are very rare, that many other providers aren\u2019t doing,\u201d Whaley said. \u201cThat dimension, I think, could set them apart.\u201d<\/p>\n Mayo did not respond to a request for comment before publication. <\/p>\n A spokesperson for Sutter Health sent a statement which reads, in part: \u201cThe older RAND analysis relies on commercial claims data from 2020-2022 and provides one lens on healthcare costs, but it does not capture the full picture of healthcare value, including quality, outcomes, patient complexity, access and the underlying cost of delivering care.\u201d <\/p>\n The statement also said that benchmarking from Vizient, a healthcare performance improvement company that serves hospitals, found that \u201cSutter\u2019s aggregate cost index was approximately 10% below the regional median, while its complication rate was better than the regional median and its mortality index was substantially better than the benchmark reference.\u201d<\/p>\n The Vizient data is not publicly available and has not been reviewed by the Reformer.<\/p>\n The American Hospital Association, the national trade group for hospitals, <\/p>\n criticized the RAND study<\/a><\/p>\n when it was released, saying it \u201coversells and underwhelms.\u201d The hospital trade group, in a statement, said that the study only serves to underscore how \u201cchronically underpaid\u201d hospitals are by Medicare rates.<\/p>\n The National Academy for State Health Policy publishes <\/p>\n how much hospitals need to charge<\/a><\/p>\n private insurers in order to break even, and compares that amount to how much they actually charge, in part to help private insurers see where they can negotiate lower prices.<\/p>\n Mayo Clinic recorded a record profit of $1.5 billion in 2025, nearly 7% of its revenue. The nonprofit need only charge private insurers around 150% of what Medicare pays in order to break even, according to the National Academy for State Health Policy. <\/p>\n Instead, according to the 2022 data, it charged private insurers 300% of what Medicare pays.<\/p>\n A 2021 federal law now requires hospitals to publish data on prices for services, though the data is complex and difficult to compare across hospitals.<\/p>\n Some policies aim to directly limit how much providers can charge. Oregon, for example, limited commercial prices to 200% of Medicare prices, which saved the state $50 million with no apparent changes to patient care, according to a 2025 Health Affairs article, which Whaley also co-authored.<\/p>\n Others try to limit consolidation, which substantial evidence has shown increases prices without necessarily improving care. The Minnesota Legislature, for example, gave the state more power to regulate hospital mergers in 2023.<\/p>\n The state\u2019s attorney general can now analyze and sue to block hospital mergers if they are against the public\u2019s interest \u2014 for example, if they increase costs for patients. <\/p>\n The Minnesota Attorney General\u2019s Office is currently reviewing the proposed acquisition of Allina Health by Sutter Health, and recently allowed the acquisition of North Memorial Health by South Dakota-based Sanford Health to move forward.<\/p>\n Text Example<\/p>\n This story was originally published on MinnesotaReformer.com.<\/p>\n Text Example<\/p>\n ____________________________________<\/p>\n This story was written by one of our partner news agencies. Forum Communications Company uses content from agencies such as Reuters, Kaiser Health News, Tribune News Service and others to provide a wider range of news to our readers. 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