Hospitals are driving up healthcare costs

The growth in hospital prices is driving up healthcare costs for private insurance more than the rise in physician prices, according to a recent study in Health Affairs.

The findings come at a time when healthcare costs and drug prices are a major focus of the Trump administration and political parties gearing up for the 2020 election. At the same time, hospital consolidation has continued to soar over the last several years, with the remaining question of how mergers and acquisitions are impacting healthcare prices.

From 2007 to 2014, hospital prices grew much faster than physician prices, according to the study, which was conducted by researchers from Yale University, MIT, Carnegie Melon University, and University of Pennsylvania.

“Our findings suggest that there may be significant differences in the bargaining leverage of hospitals and physicians,” study author Zach Cooper, PhD, associate professor of health policy in the School of Public Health and economics at Yale University, et al. wrote.

The price growth across the two care settings was different for inpatient versus outpatient care. Hospital prices for inpatient care grew 42 percent over that time period, compared to 18 percent for physician prices. Hospital-based outpatient care prices grew 25 percent, while physician prices grew just 6 percent.

The findings also back up previous studies that found hospital prices rose faster than physician prices for baby deliveries.

Pricing solutions

Researchers also noted that the results should help inform policymakers that have taken aim at regulating physician prices.

“Our work suggests that instead of focusing on growth of physician prices (which have grown roughly at the pace of inflation), in the short run policymakers should devote more of their efforts to addressing growth of hospital prices,” Cooper and colleagues wrote.

Specifically, state and federal officials should look into antitrust issues when it comes to policy solutions that could control rising hospital prices. Review of proposed mergers between healthcare organizations should be reviewed more “vigorously,” with tougher remedies such as the divestiture of facilities and hospitals with significant market overlap. Blocking mergers that could raise prices is another option that could be considered.

Researchers also suggested reference pricing, which has led consumers to access lower-price care and other reductions in prices. Payers could also better inform physicians about which hospitals deliver efficient care when it comes to patient referrals.