The commentary, “As healthcare prices are revealed, hospitals face hard choices” suggests that hospital market power is the culprit of high hospital prices. The author attempts to support this theory using a RAND study that found that certain prices paid to hospitals by private health plans are high relative to Medicare and vary widely.
The RAND authors relied on extremely limited data and questionable assumptions to draw far-reaching conclusions about the way hospitals are reimbursed for patient care. Most notably the authors themselves point out that the study’s key limitation is its small sample size—less than 5% of all covered persons in about half of all states, and just 2% of the 181 million Americans with employer-sponsored insurance nationally.
Furthermore, the commentary fails to recognize other studies that lay the responsibility for higher prices on a lack of insurance company competition in local markets. The Bureau of Labor Statistics released updated Consumer Price Index data showing that annual health insurance inflation hit a five-year peak of 13.7% in June, while hospital prices increased just 0.5%.
The fact is, according to the CMS, hospitals’ share of total health expenditures has decreased gradually over time as a percentage of total national health expenditures—declining from 43% in 1980 to 34% in 2016. This is inconsistent with suggestions that hospital and health system mergers and acquisitions are about increased leverage with dominant health insurers.
But it is consistent with findings from a 2018 Health Affairs study that said, “Insurer monopoly is the most important predictor of premium levels and growth rates.” Additionally, a study on the benefits of hospital mergers by Charles River Associates in 2017 found that net patient revenue per admission declined at acquired hospitals relative to revenue at hospitals not involved in mergers.
Hospitals will continue working to improve patients’ access to information on their anticipated out-of-pocket costs. Moreover, they will work to ensure that patients have access to other information important to making critical healthcare decisions, including on the quality of their care.
Senior vice president of policy
American Hospital Association