Recent weeks and months have brought renewed scrutiny on hospital prices as stakeholders and consumer advocates seek ways to improve the affordability of healthcare, the HFMA reports.
The latest talking point is a RAND report that found employers and private insurers paid 224% of Medicare prices for hospital services in 2020. There were significant disparities among states, with relative prices ranging from 175% below Medicare (Hawaii, Arkansas, Washington) to more than 300% above (Florida, West Virginia, South Carolina). For COVID-19 hospitalizations, commercial insurers paid 241% more than Medicare.
“Very little variation in prices is explained by each hospital’s share of patients covered by Medicare or Medicaid; a larger portion of price variation is explained by hospital market power,” the report states.
Specifically, the researchers calculated that 7% of the variation in Medicare-relative prices stems from market share, with a 10% increase in market share associated with a 0.5% increase in relative price.
