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Hospital Pricing

By June 22, 2023Commentary

As you have seen in recent posts, hospitals are often the villains in the story of high health care prices and spending.  Recent laws and rules have attempted to force greater transparency from hospitals in regard to their pricing.  Hospital compliance has ranged from reluctant to obstinate to obfuscating.  A chargemaster is a list of hospitals nominal prices, before any discounts.  They are very high and very few people pay them.  A study found that among over 2300 hospitals cash prices–paid by patients paying for their own care–were an average 58% of chargemaster prices and commercial health plan prices were an average of 64%.  So at least in these instances the hospitals were generally charging people paying out of pocket less than they were charging health plans.  But the prices are still very high.   (HA Article)

A second study finds that in regions where health plans have more market power, hospital prices paid by those plans are lower.  Market power occurs where there are fewer health plans in an area and each health plan has a relatively high market share.  Of course hospital markets are often highly concentrated as well, and the health systems have market power as well.  Other research has suggested that where both health plans and hospitals exist in a concentrated state with market power, a sort of detente tends to exist where the plans agree to pay higher prices, which they just pass on to employer and other group customers in the form of higher premiums.  This study also documents the typical wide variation in negotiated prices among health plans and providers, which is somewhat difficult to explain.  The variation exists within a single provider across health plans and across health care providers with a single plan.  (HA Article)


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