Comments on Cooper et al., “Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007–14”

By Monica Noether, Benjamin Stearns, and Sean May1

Cooper et al.2 presents a descriptive analysis of hospital and physician prices negotiated by three major health insurers that finds that hospital prices increased more than physician prices between 2007 and 2014. With no analysis of the factors that might explain the apparent difference in rate increases, the authors conclude from their purely descriptive analysis that “[o]ur findings suggest that there may be significant differences in the bargaining leverage of hospitals and physicians.” They go on to state that greater antitrust enforcement could help slow the observed growth in hospital prices, while providing no basis for this recommendation. For example, the authors do not study how the relative bargaining power of hospitals, physicians, and health insurers might have changed between 2007 and 2014, or how the costs of providing hospital or physician services might have changed over this period. As a result, their conclusions and recommendations do not follow from the analyses that the authors conducted. At most, the authors’ analysis indicates that prices paid to facilities grew at a faster rate than prices paid to physicians. What the authors do not address, or even attempt to address, is why these patterns exist.

In this brief discussion we discuss various factors (besides differences in bargaining leverage) that are more likely explanations of the observed differences in price increases. These include differential cost increases and problems in how the authors calculated price increases for hospitals and physicians. We ignore other potential problems in the representativeness of the underlying data and how the authors chose the services included in the analysis.3

1. All authors are economists at Charles River Associates. The conclusions set forth herein are based on independent research and publicly available material. The views expressed herein are the views and opinions of the authors and do not reflect or represent the views of Charles River Associates or any organizations with which the authors are affiliated. Financial support was provided by the American Hospital Association.

2. Zack Cooper et al., Hospital Prices Grew Substantially Faster than Physician Prices for Hospital-Based Care in 2007-14. Health Affairs 38:2 (February 2019): 184-189.

3. These potential problems include at least the following: 1) the data only reflect claims from Aetna, Humana, and UnitedHealthcare, which collectively cover less than 30 percent of individuals covered by employer-based insurance; 2) the analysis focuses primarily on a very limited set of services provided by physicians and hospitals; 3) while the regression analysis purports to expand the set of services studied, it is not clear that variation in service mix across years is adequately controlled for.

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