Wide variation in US hospital prices


A comprehensive and detailed analysis of US hospital prices finds that competition and location have a significant affect on hospital prices.

The study, 'The Price Ain’t Right?' by researchers at Carnegie Mellon University, Yale University, the University of Pennsylvania and the London School of Economics demonstrates that the prices hospitals negotiate with private health insurance companies vary considerably within and across geographic regions in the United States. Professor Martin Gaynor at CMU explains, “These price differences between hospitals can be thousands of dollars.

The study provides the most comprehensive and detailed analysis of private health care spending in the USA to date and examines the real prices hospitals negotiate with private insurers for medical services.

The researchers analysed 92 billion health insurance claims from 88 million people covered by three of the nation’s largest insurance companies: Aetna, Humana and UnitedHealth.

The study finds that the disparity of hospital prices within regions is the primary driver of variation in health care spending for the privately insured. For example, hospital prices for lower-limb MRIs are 12 times higher in the most expensive area (Bronx, N.Y.) than in the cheapest area (Baltimore, Md.) and can vary by up to a factor of nine within the same geographic area (Miami, Fla.).

While there are many factors influencing hospital prices, the study shows that hospitals that face fewer competitors have substantially higher prices, beyond those that would be driven by cost or quality differences. Hospitals in monopoly markets have prices that are more than 15 % higher than those in areas with four or more competitors. Hospitals that face only one competitor have prices that are 6% higher, and those that face two competitors have prices 5% higher.



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