A Deeper Dive on a Recent Study on Hospital Prices and Competition

Jun 07, 2018 - 10:00 AM by
Melinda Hatton

We previously raised concerns about the most recent “The Price Ain’t Right” study by a group of academic economists that attempted to link hospital concentration and price. We went a step further and asked the very experienced team of economists with Charles River Associates to take a deeper dive. These same economists, who have worked on dozens of hospital transactions, weighed in on the first study finding it seriously flawed. Not surprisingly, this update fared little better.

 

While downplayed, even the authors admit that their research doesn’t conclusively link market structure with prices and so, we’d urge, should be taken with canister of salt or at best viewed as “interesting.” Among the most obvious flaws, even to non-economists, is that its conclusions rely on a database that lacks Blue Cross Blue Shield information on contracts and prices. Even a cursory review of the latest American Medical Association data on insurer market concentration show that those plans dominate the nation’s health insurance markets. Recognizing that, the authors attempt to compensate without any success. In fact, their data show that “in markets with high BCBS share, hospital mergers are not associated with any significant change in hospital prices for Aetna, Humana, and UnitedHealth post-merger.”

 

Other flaws include findings inconsistent with the way in which hospitals’ contracts with insurers are actually negotiated and hospitals’ preferences for certain types of contracts based on discounts-off-charges. Moreover, by focusing on a single service – MRIs – instead of an entire bundle of services to evaluate prices, the authors once again fail to appreciate the dynamics involved in real-world negotiations and so their conclusions come up short once again. In contrast, a 2017 study prepared for the AHA by Charles River Associates confirmed that hospital mergers result in efficiencies, savings, innovation and quality improvements essential to transforming health care delivery, all of which benefits patients.

 

For a more real-world view of hospital transactions and the benefits to patients from greater coordination and focus on quality, see the deeper dive prepared for AHA by Charles River Associates.

 

Hatton is AHA senior vice president and General Counsel

Related News Articles

Blog
Putting People First: Why Language Matters in Behavioral Health Care
Language not only describes what we think, but shapes how we think. Many of us remember terms that have fallen out of fashion or even have been deemed…
Headline
Department of Labor rescinds 2018 rule expanding pool of association health plans for employers
The Department of Labor April 29 rescinded a 2018 final rule that modified the definition of “employer” under federal law such that more individuals, including…
Perspective
Integrating Mental and Physical Health to Better Support Patients and Communities
Seventy years ago, George Brock Chisholm, M.D., the first director-general of the World Health Organization, famously stated that “without mental health there…
Headline
CMS finalizes rules to improve Medicaid, CHIP access and payment
The Centers for Medicare & Medicaid Services April 22 finalized rules intended to improve access in both the Medicaid fee-for-service and managed care…
Headline
Massachusetts Medicaid demonstration expands services, continuous eligibility
The Centers for Medicare & Medicaid Services April 19 approved an amendment to a Massachusetts Medicaid and Children’s Health Insurance Program…
Headline
Study: Disparities in access to in-network behavioral health care pervasive
Patients went out-of-network 3.5 times more often to see a behavioral health clinician than a medical/surgical clinician in 2021, and up to 20 times more often…