Provider prices drive up healthcare costs

Massachusetts has had the highest per capita health spending for more than a decade, and a new comprehensive report shows provider pricing has driven this disproportionate increase in costs.

The report, compiled by Freedman HealthCare for the Massachusetts Association of Health Plans, reviewed 16 statewide cost trend reports and determined "provider prices, not utilization of healthcare services, is the biggest cost driver in the Massachusetts market."

Although Massachusetts boasts the country's highest proportion of insured residents (97 percent) and the highest per capita ratio of physicians (about 315 doctors per 100,000 patients), it still has the highest per capita health spending (about $9,300 compared to the $6,800 national average).

Blue Cross and Blue Shield of Massachusetts, the state's largest insurer, said providers' price increases from 2004 to 2008 accounted for 50 percent of its cost growth. Meanwhile, the second largest insurer, Harvard Pilgrim, "fully attributed" about 80 percent of its cost growth during the same time to price increases, reported Healthcare Payer News.

"The large provider organizations are not only large in terms of volume but because they tend to be market dominant they demand higher prices," John Freedman, a physician who wrote the report, told Mass Live. Those higher costs usually translate to increased premiums and consumer cost sharing, he added.

The report also found higher priced providers deliver most medical services, showing patient volume is more concentrated in these higher-priced settings. However, those high prices don't necessarily mean high quality of care. "Despite a wide variation in provider prices, there is little variation in quality ratings among providers," the report states.

And as providers continue to consolidate, Freedman noted growing concern that frequent mergers and acquisitions will cause prices to rise even higher instead of boosting integrated care and efficiency.

To learn more:
- here's the MAHP report (.pdf)
- read the Mass Live article
- check out the Healthcare Payer News article

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