The finding, following similar conclusions in a recent Massachusetts study, suggests that merging hospitals into accountable care organizations might raise prices rather than have the intended effect of lowering them.The journal’s study compared private insurance spending by large employers, negotiated through contracts, with Medicare spending, which is set administratively. The higher negotiated prices correlated with a hospital’s market dominance.
The study concluded that administratively set prices, for all their drawbacks, seemed to be preferable to negotiated prices where there is little competition.
Commenting on the study, the Wall Street Journal Health Blog said these findings seem to contradict arguments that highly competitive markets create an “arms race” mentality, driving up prices as providers vie to buy the latest expensive technology.
The Massachusetts study, focusing on hospitals and doctors in the state and prepared by the state attorney general’s office, found that providers with market clout negotiate rates that are twice as high as those of other providers.
The study added that this market clout – and not higher utilization — is the main cause of healthcare inflation in the state. Similarly, the journal study found that while private insurance and Medicare payments were markedly different on price, utilization of services was about the same.
Based on its findings, the Massachusetts report recommended discouraging contract provisions that perpetuate market disparities and encouraging more payment transparency and standardization.
Read the American Journal of Managed Care‘s study on hospital prices.
Read Becker’s Hospital Review‘s report on the Massachusetts study.
See the Wall Street Journal Health Blog‘s report on hospital prices.
