Clout, Not Costs, Drives Higher Charges from Hospitals, Study Says

Bargaining leverage, not the cost of providing complex care, is the main reason why some hospitals can demand prices twice as high as their competitors' and still get contracts to treat privately insured patients, according to a new study.

Bargaining leverage, not the cost of providing complex care, is the main reason why some hospitals can demand prices twice as high as their competitors' and still get contracts to treat privately insured patients, according to a new study.

The analysis by the Center for Studying Health System Change of actual payments to hospitals and physicians by private insurers in 13 U.S. cities found that the most expensive hospitals got rates as much as 60% more than the lowest-priced competitor for inpatient care, and prices that were double the competition for outpatient care.

The outpatient differences were particularly stark in three markets—Indianapolis, Kansas City, Mo., and Toledo, Ohio—where private insurers paid the most expensive hospitals more than four times what Medicare would have allowed for the same services.

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Source: Modern Healthcare

The study drew comparisons between private insurance payments to hospitals and primary-care physicians to make its point. While the most expensive hospitals charged prices far exceeding their lower-priced competitors, study authors found that primary-care doctors don't command the same mark-up power. Some family practice doctors actually received lower rates from private insurers than they did from the famously stingy Medicare program, the study found.