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New Report Finds Enormous Hospital Price Variation

posted by Alicia Caramenico

on February 18, 2016

A new analysis from AHIP shows that the wide variation in hospital prices isn’t because of medical reasons. Comparing commercial insurer and Medicare payments to hospitals from 2008 to 2012, the authors found a 14 percent average increase in the price difference. Illustrating that higher charges don’t necessarily correlate to the sickness of a hospital patient, commercial plans still paid more than Medicare across all patient diagnoses. The reason? Provider consolidation.

Large, consolidated hospital systems have stronger market power to drive up prices, giving them the ability to negotiate prices that are significantly higher than what Medicare pays for the same exact services. The result is higher health costs and increased premiums.

The report findings demonstrate competition in the hospital market is essential to eliminating price variation and protecting patients from soaring price increases. High hospital prices drive up overall health care costs, and that impacts everyone. It’s important to remember that consumers benefit when health care providers compete to offer them lower costs, higher-quality services, and innovative approaches to delivering care.