What's driving healthcare costs? A new report points the finger at hospitals, not physicians.

Report Cites Hospitals in Healthcare Cost Rise

What’s driving healthcare costs? A new report points the finger at hospitals, not physicians.

The Health Affairs report states: “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. We analyzed growth in both types of prices for inpatient and hospital-based outpatient services using actual negotiated prices paid by insurers.”

What did they find?

  • “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.”

The report offers a message for policymakers: “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.”

Meanwhile, the American Hospital Association disagreed strongly, stating: “The authors of this Health Affairs study on hospital and physician prices use limited data to draw broad conclusions. To begin with, their analysis uses data from the Health Care Cost Institute (HCCI) that includes only Americans under the age of 65 who are insured through employer-sponsored insurance (ESI). The HCCI data is comprised of claims for three large insurance companies, Aetna, Humana and United, which represent only 27.6% of individuals with ESI coverage. The Kaiser Family Foundation estimates that 49% of Americans have ESI, so the HCCI sample represents just 13.5% of Americans with any sort of health coverage, including Medicare and Medicaid. The HCCI data also does not include any data from Blue Cross Blue Shield (BCBS) plans, which is significant given that BCBS plans often have the largest share of local markets.”

Further: “Overall, both hospital price and spending growth has slowed in recent years.”

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