Study: Technology Driving up Cost of Hospital Care in Texas

Technology is driving up the cost of hospital care in Texas reveal the authors of a recent report from Rice University’s Baker Institute for Public Policy. The findings contradict perception that the rising number of uninsured persons is behind the increase in prices that hospitals charge for treating privately insured patients.

“This misconception has distracted policymakers and workers in the healthcare sector from identifying effective strategies for cost control,” Vivian Ho, the chair in health economics at Rice University’s Baker Institute for Public Policy, said in a statement

For the study, Ho used data on revenues by payer type to identify the factors for rising hospital costs in Texas between 2000 and 2007. She discovered that approximately two-thirds of the increase in prices can be explained by increases in the costs of care, which may reflect the growth and use of more advanced technology.

“If technology growth is behind the cost increases, then greater efforts should be devoted to determining which technologies are cost-effective,” Ho said. “Greater thought could also be devoted to designing reimbursement mechanisms that discourage inefficient use of new technologies.”

Even though Ho said her study can explain more than half of the observed price increase with hospital, patient and market characteristics, a sizable portion remains unexplained. The study was supported by a grant from Rice University’s Social Sciences Research Institute and by the Baker Institute’s Sid Richardson endowment.