Trauma center designation tied to higher insurance payouts

Private insurance companies pay about 25% more for trauma injury patients at hospitals designated as trauma centers. The higher payouts persist even when patients have similar injuries, hospital stays and health status.

That’s the finding of a first-of-its-kind study led by Elena Andreyeva, PhD, a health policy expert with the Texas A&M University School of Public Health, along with colleagues from the University of Southern California and the UnitedHealth Group Center for Health Care Research.

“Trauma centers are specialized hospitals,” Andreyeva said. “They provide care beyond what a standard emergency room provides, treating life-threatening emergencies like gunshot wounds and car crash injuries.”

She said trauma centers are more expensive to operate—an estimated $10 million per year for some top-level centers—because they have specialists immediately available around the clock and offer immediate access to operating rooms, specialized blood banks and diagnostic imaging.

To cover this financial burden, trauma centers add a trauma activation fee in addition to emergency room and facility fees. The fee typically can be added only when patients arrive with paramedics or other emergency responders (not on their own or with friends or family members) and when the hospital is given prior notice.

“The issue is that we did not know much about how much either insurance companies or patients actually end up paying, even though the fees are listed in hospital databases,” Andreyeva said.

For their research, funded in part by Arnold Ventures and published in Health Affairs Scholar, the team used 2019-2022 claims from a major health insurance company and reports from the American Hospital Association to assess the fees paid by commercial insurance for adults aged 18 to 64 who were inpatients at 587 U.S. trauma centers.

The sample included hospitals that recorded at least one patient who was charged a trauma activation fee—billing as code 068x—which is used only when a specialized team is called in to handle a life-threatening emergency.

Ninety percent of admissions with trauma activation fees involve patients with injury diagnoses, so the team included only adults who were treated at specialized trauma centers and had insurance claims showing at least one official medical code for an injury. They also looked at the specific types of injuries typically seen in emergency trauma wards and removed any rare or unusual cases that didn’t fit that standard profile.

This resulted in 25,694 injury-related hospital admissions comprising 16,437 non-trauma injury admissions and 9,257 trauma injury admissions. The team compared commercially insured patients who were charged this fee against similar patients who were not to find out if insurance companies paid a higher total price for these hospitalizations. They then broke down the price difference by injury severity, patient details and type of hospital.

In the unadjusted model, the total price for trauma injury admission was $12,641 higher than for non–trauma injury admission. Further statistical analysis reduced the difference in payments by $4,047, a 47% decrease from the starting point. Two factors were responsible for nearly half of that change: what the patient was treated for and how long they were in the hospital.

The study resulted in three main findings:

• Private insurers pay more for trauma admissions than for non-trauma injury care, even when the clinical details look the same on paper.
• These price gaps vary widely by region. For-profit hospitals and facilities in California, Oregon and Washington have the largest price differences, with some trauma stays costing over $25,000 more than non-trauma stays.
• Hospitals with a trauma center may use that status to negotiate higher prices with insurance companies even for their non-trauma services.

“In short, hospitals designated as trauma centers seem to get a financial boost in two ways,” Andreyeva said. “First, by charging higher rates for treating trauma injuries, and second, by raising prices for standard medical services unrelated to trauma.”

She added that future research should focus on whether patients treated for serious injuries in the emergency room (but not kept in the hospital) also end up with higher medical bills than people treated for less severe injuries.