AHA says payer consolidation, not hospital prices, raises healthcare costs

In a letter to Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, the American Hospital Association argued a recent claim that contract negotiations between hospitals and commercial payers lead to increases in healthcare costs does not consider that hospital prices are at historically low growth rates.

The Oct. 22 letter responds to an inquiry Mr. Grassley sent to the Federal Trade Commission Oct. 10 asking the agency to investigate contracts between hospital systems and insurers, according to The Wall Street Journal.

At the time, Mr. Grassley asked the FTC to examine whether contracts between health systems and payers are limiting competition and causing healthcare costs to rise. He cited a recent article in The Wall Street Journal that documented secret contract terms barring health insurers from excluding market-dominant providers from their network and prohibiting insurers from steering patients toward less-expensive rivals.

However, the AHA said the article "misconstrued the dynamics between hospitals and commercial health insurers as it pertains to contract negotiations."

"The overwhelming majority of hospitals and health systems are not the drivers in contract negotiations with commercial health insurers," the AHA continued. "When evaluating the relative bargaining power between commercial health insurers and hospitals and hospital systems, it is highly relevant that these insurers typically operate in markets where they have high market shares and face little competition."

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