Health Policy Journal Club, Health Policy

Health Policy Journal Club: It's the Hospital Prices, Stupid

Hospitals, not physicians, are the primary drivers of increased healthcare costs

The United States currently spends more on health care than any country in the world, both in terms of total amount and as a percentage of gross domestic product. Globally, healthcare expenditures are perpetually on the rise (including in the U.S.) albeit at decreasing rates. Americans are concerned with rising costs, with voters last year citing pharmaceutical, hospital, and insurance company greed as top causes, in addition to fraud and waste. As it turns out, for the privately insured the number one driver of increasing costs is pricing.

A recent study delved into this phenomenon to find out who was more responsible for this increase: physicians or hospitals. Researchers examined the insurer-negotiated prices for 3 of the 5 largest private insurers in the country for claims for inpatient, hospital-based outpatient, and certain high-volume services over an 8 year period. This captured about 28% of Americans with employer-based private health insurance. The analysis was further limited to those with no significant health comorbidities to control for changes in the health of the patients over time.

The findings were rather clear: while physician pricing rose by 6% and 18% for outpatient and inpatient care respectively, hospital prices rose by 25% and 42% therefore comprising the majority of the growth in the total price of care. Notably, hospitals were comparably responsible for the growth in the cost of care when controlling for private insurance market share or when analyzing centers where physicians were not directly employed by that hospital. 

The policy implications of these results are fairly straightforward. In particular, legislative efforts to cut the rising costs of U.S. health care, at least in the private market, should focus on insurer-negotiated prices with hospitals over physician groups or individual practitioners. How to operationalize this is the topic of much debate (e.g. anti-trust legislation, government-appointed direct oversight, and patient unions, to name a few), but this research does suggest that hospital prices are where to most efficiently cut cost.

PMID: 30715987

Cooper Z, Craig S, Gaynor M, Harish NJ, Krumholz HM, Reenen JV. Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007–14Health Affairs. 2019.

Abstract

Evidence suggests that growth in providers' prices drives growth in health care spending on the privately insured. However, existing work has not systematically differentiated between the growth rate of hospital prices and that of physician prices. We analyzed growth in both types of prices for inpatient and hospital-based outpatient services using actual negotiated prices paid by insurers. We found that in the period 2007-14 hospital prices grew substantially faster than physician prices. For inpatient care, hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent, while physician prices grew 6 percent. A majority of the growth in payments for inpatient and hospital-based outpatient care was driven by growth in hospital prices, not physician prices. Our work suggests that efforts to reduce health care spending should be primarily focused on addressing growth in hospital rather than physician prices. Policy makers should consider a range of options to address hospital price growth, including antitrust enforcement, administered pricing, the use of reference pricing, and incentivizing referring physicians to make more cost-efficient referrals.


EMRA + PolicyRx Health Policy Journal Club: A collaboration between Policy Prescriptions and EMRA


As emergency physicians, we care for all members of society, and as such have a unique vantage point on the state of health care. What we find frustrating in our EDs - such as inadequate social services, the dearth of primary care providers, and the lack of mental health services - are universal problems.

As EM residents and fellows,  we learn the management of myocardial infarctions and traumas, and how to intubate, but we are not taught how health policy affects all aspects of our experience in the ED. Furthermore, given our unique position in the health care system, we have an incredible opportunity to advocate for our patients, for society, and for physicians. Yet, with so many competing interests vying for our conference education time, advocacy is often not included in the curricula.

This is the gap this initiative aims to fill.  Each month, you will see a review of a new health policy article and how it is applicable to emergency physicians.

 

Related Articles

A Seat at the Table: Physicians as Policymakers

Zach Jarou, MD 10/06/2013
A Seat at the Table: Physicians as Policymakers Imagine a world where patients in need of emergent treatment were turned away because of their race, religious beliefs, or ability to pay. Believe it o

A Solution to the SGR: Value-Based Medicare Payments

A Solution to the SGR: Value-Based Medicare Payments You have probably heard of the SGR, or Sustainable Growth Rate. It is a formula that was put in place in 1997 as part of the Balanced Budget Act t
CHAT NOW
CHAT OFFLINE