States report hospital prices as top healthcare cost burden, but they're reluctant to negotiate them

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State employee health plans cite hospital prices as the primary driver of cost, but they rarely negotiate hospital prices during the efforts to curb costs, according to a recent report from Washington, D.C.-based Georgetown University's Center on Health Insurance Reforms.

State employee health plans said the cost of hospital services beat out drug prices, inappropriate utilization, and physician and ambulatory prices as the primary driver of cost.

The report said state health plans are more likely to go after other forms of health spending when curbing costs because of how difficult it is to negotiate hospital prices. This difficulty stems from hospitals' political power, a lack of inter-hospital competition and employee pressure to maintain wide networks of providers.

"These challenges have led many [state employee health plan] administrators to focus instead on constraining enrollees’ use of healthcare services through deductibles and other benefit design strategies," the report said. "These strategies also engender opposition from employees and union stakeholders because they involve shifting plan costs to enrollees through higher cost-sharing."

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