By Joseph Burns
Writing about a new report from the Health Care Pricing Project (HCCP), Dan Gorenstein made the case that researchers now have compelling data showing that hospital consolidations drive up prices. Coverage of the HCPP report by Gorenstein and others raises an interesting question: Do we finally have game-changing data on hospital price variation?
The fact that hospital mergers drive up prices is certainly not new. But the HCPP researchers used newly released data from three large health insurers — Aetna, Humana, and UnitedHealthcare — and they controlled for factors that hospital administrators usually cite when explaining why their facilities charge more than others. It was, as Gorenstein described in his Marketplace article, “an unprecedented look at medical costs nationwide.”
“Until now though, the evidence has been limited to single states or hospitals that have merged. And it often relied on the sticker price listed by hospitals,” he wrote. “But this analysis is different because it comes from hospitals coast to coast and uses the actual amount insurers paid.”
For journalists, the HCPP site offers a trove of information, including the report itself, an explanation of the project, market graphs, presentation slides and sample claims data. Simply reading the report would give reporters enough information to challenge the usual arguments hospital administrators make in favor of mergers.
Consider what two of the four authors of the report told Gorenstein. First, he quoted Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University and chair of the governing board of the Health Care Cost Institute, which supplied the insurers’ data to HCPP. “We have this large body of evidence covering many, many years that consistently shows if you happen to live in an area with only one hospital you are going to pay a lot more,” Gaynor told him. Last year at this time, we covered HCCI’s work to collect health insurers’ data.
The other author Gorenstein quoted is Zack Cooper, Ph.D., assistant professor of health policy and of economics at Yale University, who said the research disproves the idea, which hospital administrators promote, that their prices are high because their hospitals deliver high quality care, they have sicker patients or they have more patients on Medicare than other facilities. “That’s just not true,” Cooper told Gorenstein, noting that researchers controlled for these factors. Cooper also said that “market power matters more than the rest.”
The other authors of the report were John Van Reenen, director of the Centre for Economic Performance at the London School of Economics; and Stuart Craig, a doctoral student at the University of Pennsylvania.
Hospitals in almost one-third of the markets in the United States have monopolies or are close to having monopolies, Gorenstein wrote, adding, “This study could be persuasive enough that the bar on any future deals is raised.” The data also show hospital prices for certain services in 118 U.S. cities.
An article on the report in the New York Times’ Upshot blog, “The Experts Were Wrong About the Best Places for Better and Cheaper Health Care,” addressed the issue of what effect the project may have. A follow-up article answered some of readers’ questions.
“Health care researchers who have seen the new findings say they are likely to force a rethinking of some conventional wisdom about health care,” reporters Kevin Quealy and Margot Sanger-Katz wrote. “In particular, they cast doubt on the wisdom of encouraging mergers among hospitals, as parts of the 2010 health care law did.”
Images reprinted with permission. Source: Cooper Z, Craig S, Gaynor M, Van Reenen J, The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured, The Health Care Pricing Project, December 2015 (accessed Feb. 10, 2016)
