Contracting practices create Mass. hospital pricing disparities

Contracting practices that "reinforce and perpetuate disparities in pricing" have created problems in the commercial healthcare marketplace in Massachusetts, raising concerns that existing systemic disparities in reimbursement may, over time, create a provider marketplace dominated by very expensive 'haves' as the lower and more moderately priced 'have nots' are forced to close or consolidate with higher paid systems," says a preliminary report from the Office of Inspector General Martha Coakley.

Health insurers paid Massachusetts hospitals within the same geographic area significantly different prices for similar services. These pricing variations cannot be explained by: quality of care, the complexity of patient populations, whether hospitals are caring for heavy Medicare or Medicaid populations, or whether the hospital is a teaching or research facility, according to the report. Differences in hospital costs for delivering services also can't explain the pricing differences.

"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," says the report. "Price increases, not increases in utilization, caused most of the increases in healthcare costs during the past few years in Massachusetts."

To learn more about healthcare cost trends and drivers in Massachusetts:
- read the report