How’s this for bipartisanship? Groups on both the left and the right can agree on not just a major policy problem but potential solutions for it.
Yet corporate influence and lobbying have stymied action on reform for far too long. Welcome to America’s dysfunctional health care system — brought to you in part by Big Hospitals.
High Prices, Monopoly Power
Recently, the left-leaning advocacy group Families USA released an analysis of hospital pricing data, with a particular focus on big corporate chains. For 15 large systems, the hospitals charged commercial insurance an average of 282 percent of Medicare rates, while earning an average of $22.1 million in net income per hospital.
Breaking down the data by various metrics (rural versus urban, etc.), the prime differentiator became apparent. Independent hospitals charged an average of 221 percent of Medicare rates, while earning an average of $3 million per hospital per year. By contrast, hospitals that comprised part of a larger system charged an average of 277 percent of Medicare rates, while earning an average of $27.7 million in net earnings annually — more than nine times the earnings of independent facilities.
The analysis comes with caveats, of course. Medicare’s bureaucratic-driven reimbursement formulae don’t necessarily represent the “right” price for a given good or service. And independent hospitals may have fewer beds than those in larger systems, which might explain some of the income disparity. But the trend appears clear: Big Hospitals both charge and rake in Big Bucks.
Why do these system-affiliated hospitals charge so much? In many ways, because they can. In practically every state, the top five hospital systems control at least half of the market. The more market clout these large systems hold, the more they can engage in anticompetitive, take-it-or-leave-it tactics with insurers, which ultimately stick patients with the (higher) bill.
Bipartisan Solutions
Surprisingly, I found myself in violent agreement with Families USA not just on the problem but on many policy solutions to tame Big Hospitals. The paper’s executive summary mentioned five proposals:
- Enact site-neutral payments so the same care costs the same everywhere.
- Mandate full price transparency across hospitals and health plans.
- Ban anticompetitive practices between hospital systems and insurers.
- Strengthen oversight of nonprofit hospitals to ensure real community benefit.
- Limit hospital prices or hospital price growth relative to Medicare benchmarks.
Depending on the details, the third and fifth policies could give this conservative some heartburn, as antitrust enforcement and some form of price controls could generate a sprawling bureaucracy and limit access to care. But site-neutral payments — i.e., not paying more for a doctor visit just because the doctor’s office is classified as a “hospital outpatient clinic” — greater transparency, and oversight of nonprofit hospitals’ status strike me as strong steps toward reform.
Ironically, the Paragon Health Institute, a conservative think tank, released a paper on hospitals just before Families USA did. (I have previously done work for Paragon but had no involvement with this paper, and the opinions in this piece are, as always, solely my own.) Like Families USA, the Paragon paper discussed hospitals’ price hikes and anti-competitive behavior; it similarly proposed site-neutral payment, greater transparency, and oversight of nonprofit hospitals’ tax status as reform options.
Political Will
If the conservative and left-wing advocacy/think-tank worlds agree not just on the problem but on several solutions when it comes to reining in hospitals’ abusive tactics, then why hasn’t Congress acted? Good question. In this case, as in many cases, it likely comes down to an issue of dollars and cents.
By definition, hospitals that generate sizable profits can afford to hire lobbyists to protect their revenues, generated in no small part by government programs, from any attempt to scale back their largesse. And although rising hospital prices hurt all of us, that harm is diffuse and therefore less visible, while hospitals will fight tooth and nail to defend policies that affect their business model.
It also hasn’t escaped notice to those working in health policy that both the House and Senate minority leaders hail from New York — not just the Empire State but New York City itself. It therefore seems unlikely that either Sen. Chuck Schumer or Rep. Hakeem Jeffries will lead their party’s efforts to crack down on the hospital-industrial complex that represents a major “industry,” flawed though it is, in the Big Apple.
As I stated before, both left and right agree on the problem and on some (though not all) of the ways to solve it. The only question is whether and when our elected officials can overcome corporate capture and summon the political will to act.
