Hospital Fees More Related to Reputation and Market Share Than Quality

The medical insurance industry has long argued that hospital pricing is the major driver behind health care premiums. A new report looks at why some hospitals have more negotiating power than others when it comes to setting fees for inpatient services. It also confirms what many have suspected: that hospitals charging higher prices do not necessarily rank higher in quality of care than lower-priced hospitals.

The study, conducted by Health Affairs for the nonpartisan National Institute for Health Care Reform, found that higher-priced hospitals received 60 percent more dollars for inpatient care than lower-priced ones. On some metrics, such as 30-day readmissions and postsurgical deaths, higher-priced hospitals performed worse than low-priced ones. On other measures, such as 30-day mortality, they performed the same. However, higher-priced hospitals scored significantly better on reputation rankings and had a market dominance, a 28 percent share.

These factors caused the report’s authors to conclude that higher-priced hospitals are a priority for insurance networks who must accept their higher pricing. Some qualifiers were noted: higher-priced hospitals were more likely to treat low-income patients, offer an extensive array of specialized services, and provide more medical education opportunities than the lower priced ones. But the report illustrates why the fee-for-service model for health care is undergoing radical revision in the Affordable Care Act era.

I’m John Howell for 3BL Media.