Hospitals, insurers clash over rising prices

Hospitals and insurers are clashing over new research that found surges in hospital inpatient pricing, even as the Obama administration argues that hospital costs are moderating.

The largest health insurer advocacy group, America's Health Insurance Plans, touted a study by its researchers and published in the March issue of the American Journal of Managed Care that inpatient hospital prices increased 8.2% annually from 2008 to 2010.

The finding was seen by insurers as further evidence of their long-held contention that provider cost increases drive healthcare inflation and not insurers' administrative costs or profit-seeking.

“To make healthcare coverage more affordable for consumers and employers, there needs to be a much greater focus on the underlying cost of medical care,” Karen Ignagni, president and CEO of AHIP, said in a news release.

The findings drew a sharp rebuke this week from the American Hospital Association.

“There's nothing new here in terms of the insurance industry trying to place the blame for price increases solely at the feet of the provider community,” said Rick Pollack, executive vice president of AHA.

He cited a November 2012 American Medical Association study that found anticompetitive market conditions among insurers in 70% of metropolitan areas it studied, which it blamed for premium increases.

“They continue to make the charge that the reason for the healthcare premium increases is all because of the increases in the prices that providers and hospitals charge, which is all obviously an effort to deflect the fact that premium increases to consumers are increasing at a rapid rate," he said.

Pollack also noted the annual report of national health expenditures released in January by the CMS actuary found that premium rates for private insurers rose faster in 2011 (1.8%) than underlying healthcare costs (1.7%).

The finding that hospital charges continue to rapidly increase also runs counter to the Obama administration's analysis of the health spending slowdown, which it credits in part to “early changes in medical-care delivery made in anticipation of impending Medicare payment reform.”

Those changes were credited by the administration in the March 15 report with dropping acute-care hospital readmission rates a full percentage point below the 19% of all admissions rate around where they have hovered for the previous five years.

The fight over the new health inflation research highlighted the continuing importance of health costs, despite recent celebrations over a slow-down in health spending growth. Such a cost focus may stem from the expectation that healthcare costs could soon take off again. The same actuary report projected that national health expenditure growth will jump from 3.8% in 2013 to 7.4% in 2014.

Although the actuary does expect higher hospital spending next year, much of the blame for the expected surge was laid elsewhere.

“Because the newly insured populations are anticipated to be relatively younger and healthier than currently insured individuals they are expected to devote a greater proportion of their spending to prescription drugs and physician & clinical services, and a smaller proportion of their spending to more acute care, such as hospital care,” the actuary's report wrote.

Specifically, hospital spending is expected to grow 6.7% next year (or 1 percentage point higher than if the health law was not enacted), while prescription drug spending is projected to grow 8.8% (4.7 percentage points faster than without reform) and physician and clinical services spending is projected to increase 8.5% (3.2 percentage points higher than without the health overhaul).