A meta-study of healthcare prices published in the February 2019 issue of Health Affairs finds that, during the period of 2007 through 2014, hospital price inflation dramatically outpaced physician service price inflation. The authors of the study suggest that policymakers look at a range of strategies to rein in hospital prices.
According to the team of researchers—Zack Cooper, Stuart Craig, Martin Gaynor, Nir J. Harish, Harlan M. Krumholz, and John Van Reenen, found in their article, “Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007-14,” “Evidence suggests that growth in providers’ prices drives growth in health care spending on the privately insured. However, existing work has not systematically differentiated between the growth rate of hospital prices and that of physician prices.” The researchers note that “We analyzed growth in both types of prices for inpatient and hospital-based outpatient services using actual negotiated prices paid by insurers. We found that in the period 2007–14 hospital prices grew substantially faster than physician prices. For inpatient care, hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent, while physician prices grew 6 percent. A majority of the growth in payments for inpatient and hospital-based outpatient care was driven by growth in hospital prices, not physician prices. Our work suggests that efforts to reduce health care spending should be primarily focused on addressing growth in hospital rather than physician prices. Policy makers should consider a range of options to address hospital price growth, including antitrust enforcement, administered pricing, the use of reference pricing, and incentivizing referring physicians to make more cost-efficient referrals.”
Among the potential policy options open to healthcare policymakers: active antitrust enforcement, with state and federal officials reviewing proposed mergers “more vigorously”; regulating hospital payments, “particularly in markets that are already highly concentrated”; and “reference pricing [that] has led consumers to access lower-price care and led to some modest reductions in provider prices.”
