AHA: Hospital Pricing Variations Unrelated to M&A Activity

Cheryl Clark, for HealthLeaders Media, March 10, 2011

The American Hospital Association has issued a second report to counter claims that acute care prices are rising as a direct result of hospital consolidations, which enhance providers' bargaining clout with payers. 

Rather, the AHA says, hospital prices "are directly related to the costs of providing services to patients and their communities, including wages, capital investment, and the level and specialization of services."

Most important, the latest report "should dispel un- or poorly supported claims that differences in hospital prices are attributable automatically to market power," the group said. The report also shows a link between hospitals' efforts to improve care coordination, reduce costs, and lower prices.

Cost reduction was cited as the top priority among hospital finance leaders polled for the HealthLeaders Media Industry Survey 2011.

Titled "Assessment of Cost Trends and Price Differences for U.S. Hospitals," the report was prepared in collaboration with economists Margaret Guerin-Calvert and Guillermo Israilevich with Compass Lexecon.

Among the report's findings:

• Hospital costs represent 30% of the nation's healthcare expenditures.

• More than half of hospital costs are due to the cost of labor.

• Labor costs grew by between 5 to 8% a year from 2002 to 2009.

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