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AHIP: Hospital Inpatient Pricing Up Sharply

John Commins, for HealthLeaders Media, March 20, 2013

Jeffrey G. Micklos, executive vice president and general counsel for the Federation of American Hospitals says the study doesn't explain the reasons for cost growth and price variations that it found.

"What we're seeing is that provider consolidation is happening and it is a response to the marketplace," Micklos told HealthLeaders Media. "It's not only the affordable care act and coordinated care and integrated care efforts but it is also reaction and rebalancing in some markets. So when they have a finding that says there are wide variations in price levels and growth rates in localities and states our position is 'that is the market and the market is working. Some places there will be more rebalancing than others. These trends are cyclical. They come and go."

While provider consolidations have been cited as a driver of healthcare costs by the health insurance industry, Micklos says market leverage is not the sole motivation.

"It's really being driven by trying to break down the silos of care and coordinate care more," he says. "Hospitals look at themselves as healthcare companies and there are a bunch of reasons why they are aligning with physicians. And it is not just their desire to do so. Physicians are also facing this new market where they are being asked to do more with less with regards to capital investment and health information technology and developing a quality infrastructure platform and malpractice and other typical costs that make it difficult for them to continue to practice in that two- or three-doctor practice."


John Commins is a senior editor with HealthLeaders Media.

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2 comments on "AHIP: Hospital Inpatient Pricing Up Sharply"


J. Lauer (3/20/2013 at 10:49 AM)
Good data here, but analysis of the reasons for the increase in prices is weak. A bunch of possibilities are thrown against the wall like spaghetti, but none stick. Seems to me prices are rising because the payer incentives and competition in healthcare are lacking. It was inferred, if not explicitly stated that consolidation has decreased competition even further. Basically, the mess is getting worse.

Aaron (3/20/2013 at 10:23 AM)
Oh Please! While I'm no big fan of insurance companies, their business model inherently must adjust premium prices to cover the expected payments they will pay to their members. No one wants their insurance company to lose money and stop paying claims... right? The real driver that is increasing health care costs is the consolidation of physicians under hospital control. Hospital owned physicians, testing and procedures are reimbursed at 2 to 5 times the rate of the same services at independent outpatient centers. As the hospitals are controlling more and more physicians and demanding all of their testing and procedures remain within their organization, the cost of care has skyrocketed. Insurance companies simply adapt. When insurance companies have tried to fight back and reject the hospital systems annual price increase demands - they are "threatened" with the risk of losing the hospital system and all the physicians they control from that insurance company's plan. Solution: Reimburse hospitals adequately for services they do well that NEED to be done in a hospital i.e. inpatient ICU, ER, etc. But hospitals should no longer be allowed to charge 2-5X more for services that are better served by independent (patient comes first, not hospital finances) outpatient centers. If we continue to allow hospitals to gouge the health care consumer (indirectly through insurance companies) for these services, soon there won't be any cost effective alternatives as the independent physician clinics will be a thing of the past and insurance companies will lose the last tiny bit of leverage they have left.