JAMA: “Hospital Price Increases Are Now the Largest Contributor to Increases in Insurance Premiums”

An article by Bob Kocher and Ezekiel Emanuel in the Journal of the American Medical Association (subscription required) looks at how hospital consolidation is driving up health care costs, noting that “prices for hospital services are 13% to 25% higher in consolidated hospital markets.”

Hospital spending currently accounts for one-third of all health expenditures. According to the article, “…hospital price increases are now the largest contributor to increases in insurance premiums. According to an estimate for 2013, hospital prices will increase 8.2%—more than any other sector of health care spending.”

When hospitals consolidate, patients are sometimes forced, simply by lack of other options, to seek care at a large hospital system. The article notes that “Patients and physicians frequently exacerbate the problems posed by hospital consolidation. Patients typically seek care at a hospital near their home. Neither the referring physicians nor patients typically know the prices charged by various hospitals or differences in the outcomes and patient experience that may justify price differences.”

The increase in the growth of large hospital systems reduces competition and choice for patients, and increases costs. This trend must be reversed, as “Creating competitive hospital markets benefits patients and is essential to reduce the rate of health care cost growth. Moving from an era of market power enabling hospitals to be price setters to a market in which patient demand drives hospital prices and quality improvement has the potential to transform the US health delivery system.”

Kaiser Health News also picks up on the issue, examining the record-pace growth in new trauma centers.

According to the article, “While experts say some parts of the country, especially rural areas, need trauma services, they caution that too many higher level facilities in one area can result in higher cost and reduced quality.

When trauma centers operate too close to one another, they compete for specialists and have fewer patients to recoup high fixed expenses for staffing and technology, said Ellen MacKenzie, chairwoman of health policy at Johns Hopkins Bloomberg School of Public Health, who co-authored the New England Journal study.”

As is the case in hospital consolidation, higher reimbursement rates are a key motivator. “Hospitals can get higher reimbursements for trauma services because typically, few facilities offer them, and patients can’t shop for where to go in an emergency, Williams said. ‘Trauma centers can basically charge whatever they want,’ he said.”

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