Study: Market power drives up hospital prices

Hospital costs for those who are privately insured vary widely and are much higher than Medicare payment rates, a new study by the Center for Studying Health System Change (HSC) found.

The study was conducted across 13 U.S. metropolitan areas with large amounts of autoworkers, including: Ann Arbor, Mich.; Cleveland; Indianapolis; Detroit; Kansas City; St. Louis; Cocomo, Ind., Toledo, Ohio; Lansing, Mich.; Flint, Mich.; Youngstown, Ohio; Buffalo, N.Y.; and Warren, Mich.

Within these communities, hospital prices for privately-insured patients were found to be approximately one-and-a-half times the Medicare rates for inpatient care, and twice what Medicare pays for outpatient services.

"The dramatic variation in prices from one hospital to another points to the significant market power of certain hospitals to command high prices, even in markets with a dominant insurer," study coauthor Chapin White said in a statement released by HSC.

The study also found wide variation within specific communities. The most expensive hospital normally was paid 60 percent more than the least expensive hospital for identical inpatient services. The variation was even more pronounced for outpatient services, with the most expensive hospital typically paid nearly twice as much as the least expensive.

For primary care physician services, the study found far less variation between Medicare rates and private insurance, and similarly little variation within markets. It also found more variation within and across markets for specialist physician services, and determined that prices generally were higher relative to Medicare rates.

A report published last year from the CALPIRG Education Fund found that hospital prices for surgical procedures display similarly wide variations, with the most expensive hospitals charging nearly three times more than the least expensive.

To learn more:
- here's the HSC study
- read HSC's statement