Do hospitals have too much market power?

A non-partisan consumer advocacy group warns about concentrated market power for hospitals and healthcare systems, but the hospital sector dismisses its findings as a retrograde point of view.

The National Academy of Social Insurance's (NASI) study was authored by a variety of high-ranking academics in healthcare and business. It concluded that since the backlash against managed care in the 1990s, hospitals and hospital systems have accumulated greater leverage over the health insurance sector, allowing them greater power in terms of dictating prices.

"Healthcare spending in the U.S. is nearly double that of similarly developed nations, and prices are an important factor in many local markets," Lee Goldberg, vice president of health policy at the NASI, said in a statement. "When a local market is dominated by one or two health systems or insurers, prices increase; providers compete over everything but the two things consumers really care about: quality of care and price."

The study called for more competition among providers in individual markets, greater price transparency for consumers and for price variation to "reflect real differences in costs, organizational mission and consumer preferences, and not the leverage that insurers and providers have when negotiating."

However, the hospital sector has dismissed the study as insignificant. The NASI study "assumes the past is prologue with only glancing notice of the forces that are dramatically changing healthcare," according to American Hospital Association Senior Vice President Melinida Hatton in a blog post. "NASI's pricing study focuses on hospitals nearly to the exclusion of commercial insurers, pharmaceutical giants and others in the health care rena that add to its cost beyond perceived value. And yet, hospital price growth is at historic lows, a fact the report dismisses by claiming that's just too good to last in an era of consolidation."

The study fuels a growing demand that providers operate with more price transparency, but it remains to be seen whether the industry can accomplish actual transparency and furnish consumers with actionable information.

To learn more:
- read the NASI study (.pdf)
- check out the NASI statement 
- here's the AHA blog post