Study Finds Large Variance in Hospital Pricing, Use of Market Power to Negotiate Higher-Than-Competitive Prices

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A recently study by the Center for Studying Health System Change suggests that hospitals use market clout to negotiate higher-than-competitive prices, which causes price variation that is inconsistent with what is found in other industries within competitive markets, according to an HSC news release.

The study examined eight health care markets — Cleveland, Indianapolis, Los Angeles, Miami, Milwaukee, Richmond, Va., San Francisco and rural Wisconsin — and found that average inpatient hospital payment rates of four large national insurers ranged from 147 percent of Medicare in Miami to 210 percent in San Francisco.

Although this variation across markets is significant, the study found that price variation within markets was 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. The highest-priced Los Angeles hospital with substantial inpatient claims volume received 418 percent of Medicare, according to the report.

While not as pronounced, the study also found significant variation in physician payment rates also exist across and within markets and by specialty.

The study was commissioned by the Catalyst for Payment Reform, a non-profit group representing some of the nation's largest employers.

Read the release on hospital pricing.

Read more coverage on hospital pricing.

- Massachusetts Report Finds Hospitals' Negotiating Clout With Insurers Drives Up Costs

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Dominant Hospitals Charge 2-3 Times More, Oregon Price-Reporting Shows

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