Some New York hospitals are commanding far higher prices than their regional competitors, and market leverage – not quality or demographic factors – is the most likely explanation, according to an important new study from the New York State Health Foundation.
The most expensive hospitals are being paid 1.5 to 2.7 times more than the lowest-priced hospitals in their areas, the study found. The higher-cost facilities did not consistently deliver better quality of care, treat sicker patients, or have the prestige of being an academic medical center.
“Hospitals with higher prices do not necessarily have higher quality,” the report says. “Likewise, hospitals with lower prices do not necessarily have lower quality.”
There is a statistical correlation between higher prices and a hospital’s market leverage, the authors found: Hospitals that controlled a large market share, or were members of broad systems, or were the only local providers in rural areas tended to receive bigger payments.
The findings suggest that a wave of consolidation has given some hospitals too much bargaining clout in negotiations with insurers. The authors also link the disparities to a lack of transparency in hospital pricing and contracting practices that prevent health plans from steering customers to affordable providers.
The study questions the idea that hospitals negotiate for higher prices to offset the lower reimbursements they get from government-sponsored health plans. In general, hospitals treating more Medicare and Medicaid patients charged lower prices, while hospitals treating fewer Medicaid and Medicaid patients charged more.
Hospitals account for about 40 percent of overall healthcare spending, the study said.
The report, prepared by a team led by Gorman Actuarial Inc. of Massachusetts, analyzed the pricing of 107 hospitals in the New York City, Albany, and Buffalo regions, using non-public data obtained from nine insurers under an order by the Department of Financial Services.
The study recommends policy changes aimed at boosting the competitiveness of New York’s hospital market, such as making hospital pricing details more readily available to the public and barring contract provisions that block insurers from steering customers to lower-cost institutions.
The study is modeled on research by the Massachusetts Attorney General’s Office in 2010, which documented similar disparities in hospital pricing. The findings prompted Bay State lawmakers to gather and publicize more data on hospital pricing, establish a target growth rate for overall healthcare spending, and sanction facilities whose costs rise too fast.
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