A study by the Center for Studying Health System Change finding wide variances in hospital pricing is "deeply flawed" in several ways, according to a release by the AHA.
The study is based on unverified data from "a handful of powerful insurance companies" and each insurer used different methodologies to generate price comparisons. "No effort was made to verify, validate or correlate the information provided," the AHA said.
What HSC found
The HSC study suggested hospitals use market clout to negotiate higher prices, causing price variations that are inconsistent with prices for other industries in competitive markets, according to an HSC release.
Examining four insurers' average payment rates in the markets of Cleveland, Indianapolis, Los Angeles, Miami, Milwaukee, Richmond (Va.), San Francisco and rural Wisconsin, HSC found they ranged from 147 percent of Medicare in Miami to 210 percent in San Francisco.
The study found price variation within markets to be even more dramatic. For example, the hospital with prices at the 25th percentile of Los Angeles hospitals received 84 percent of Medicare rates for inpatient care, while the hospital with prices at the 75th percentile received 184 percent of Medicare rates.
More of AHA's critique
The AHA criticized the study's use of Medicare rates as the benchmark. "Because Medicare covers far less than the cost of caring for patients, virtually every hospital, not just those in the paper, is required to pass on some of that cost to others," the AHA stated.
Also, "Medicare rates, like insurers', vary among hospitals for valid reasons," the association said. Such variations include costs of training physicians, caring for low-income populations and serving rural communities.
Read the AHA release on hospital pricing.
Read the HSC release on hospital pricing.
Read more coverage on hospital pricing:
- Study Finds Large Variance in Hospital Pricing, Use of Market Power to Negotiate Higher-Than-Competitive Prices
- Massachusetts Report Finds Hospitals' Negotiating Clout With Insurers Drives Up Costs
- Dominant Hospitals Charge 2-3 Times More, Oregon Price-Reporting Shows
The study is based on unverified data from "a handful of powerful insurance companies" and each insurer used different methodologies to generate price comparisons. "No effort was made to verify, validate or correlate the information provided," the AHA said.
What HSC found
The HSC study suggested hospitals use market clout to negotiate higher prices, causing price variations that are inconsistent with prices for other industries in competitive markets, according to an HSC release.
Examining four insurers' average payment rates in the markets of Cleveland, Indianapolis, Los Angeles, Miami, Milwaukee, Richmond (Va.), San Francisco and rural Wisconsin, HSC found they ranged from 147 percent of Medicare in Miami to 210 percent in San Francisco.
The study found price variation within markets to be even more dramatic. For example, the hospital with prices at the 25th percentile of Los Angeles hospitals received 84 percent of Medicare rates for inpatient care, while the hospital with prices at the 75th percentile received 184 percent of Medicare rates.
More of AHA's critique
The AHA criticized the study's use of Medicare rates as the benchmark. "Because Medicare covers far less than the cost of caring for patients, virtually every hospital, not just those in the paper, is required to pass on some of that cost to others," the AHA stated.
Also, "Medicare rates, like insurers', vary among hospitals for valid reasons," the association said. Such variations include costs of training physicians, caring for low-income populations and serving rural communities.
Read the AHA release on hospital pricing.
Read the HSC release on hospital pricing.
Read more coverage on hospital pricing:
- Study Finds Large Variance in Hospital Pricing, Use of Market Power to Negotiate Higher-Than-Competitive Prices
- Massachusetts Report Finds Hospitals' Negotiating Clout With Insurers Drives Up Costs
- Dominant Hospitals Charge 2-3 Times More, Oregon Price-Reporting Shows