Ken Bottles, M.D., writes in Hospital Impact about how a how a major new study showing that hospital prices vary enormously between different American cities will affect all hospital executives’ strategies even as it calls into question one of the theories behind the Affordable Care Act.
Dr. Bottles notes that “the biggest bombshell delivered by the study is that there is a low correlation (14 percent) between spending on Medicare beneficiaries and spending on the privately insured.”
“The take-home messages for hospital leaders, according to the study authors, are:
- “Cities with hospital consolidation are associated with higher hospital prices.
- “Price is the primary driver of spending variation for privately insured. patients
- “Monopoly hospitals have a 15.3 percent price premium.
- “Strategies to address healthcare spending variation across the U.S. may differ for publicly and privately insured populations.
- “Reducing spending for the privately insured will come via targeting high prices and service intensity by anti-trust enforcement, as well as price regulation.
- “There is a significant opportunity to save by steering patients toward low cost/high quality providers via value-based insurance design.
- “There’s a significant need to make prices more transparent to consumers.”
Dr. Bottles writes that “All hospital leaders will need to carefully read this new white paper, which calls into question some of the fundamental beliefs that have driven organizational strategy up to this time. Using only Medicare data and not private insurance data can result in decisions that will be harmful to the organization’s survival in a time of rapid change and uncertainty.”