AHA: Hospital Pricing Variations Unrelated to M&A Activity

Cheryl Clark, for HealthLeaders Media , March 10, 2011

One of the studies, published last year in the journal Health Affairs, was entitled, "Unchecked Provider Clout In California Foreshadows Challenges To Health Reform.

It said, in part, that in California, faced with declining payment rates, hospitals "have implemented various strategies that have strengthened their leverage in negotiating prices with private health plans. When negotiating together, hospitals and physicians enhance their already significant bargaining clout. California's experience is a cautionary tale of national health reform: It suggests that proposals to promote integrated care through models such as accountable care organizations (ACOs) could lead to higher rates for private payers."

The California report suggested that policymakers need to consider price caps and all-payer rate setting, "because antitrust policy has proved ineffective in curbing most provider strategies that capitalize on providers' market power to win higher payments."

The other report,fromthe Office of the Massachusetts Attorney General, concluded in part that "Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers."

It also found that price increases, not increases in utilization, caused most increases in healthcare costs in that state and higher priced hospitals "are gaining market share at the expense of lower priced hospitals, which are losing volume."

The latest AHA report details the rise in hospital costs due to physician services, home healthcare and pharmaceutical costs, but says labor costs, including salaries and benefits for doctors, nurses, and technicians and other numerous personnel account for a large proportion.


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