- Higher-priced emergency care was associated with lower mortality in hospital markets with less hospital concentration, but survival rates were similar for low- and high-priced hospitals in more concentrated markets, according to a working paper released last week from the nonprofit National Bureau of Economic Research.
- The researchers determined that additional spending on quality improvements at expensive hospitals in unconcentrated markets is potentially cost-effective.
- However, they found no evidence of better outcomes among patients admitted for emergency care to pricier hospitals in markets with less competition, despite substantially higher costs. "In these concentrated markets, high prices likely reflect patients' lack of alternative options, not hospital quality," the study said.
Extensive consolidation in the U.S. hospital sector over the past several decades has raised concerns about how well the market is functioning and has generated calls for strict regulation of hospital prices. Some states have set caps on hospital pricing.
Hospital prices soared 31% between 2015 and 2019, compared to a 13% rise in physician prices in that timeframe, according to data from the Health Care Cost Institute.
The Biden administration, which has made antitrust enforcement a priority, has the healthcare industry in its sights, and the Federal Trade Commission has singled out hospitals for increased scrutiny with mergers surging.
Just last month, the FTC sued to block a merger of Rhode Island's two largest health systems. The systems then abandoned their plan and said they wouldn't pursue litigation.
The American Hospital Association has argued that most proposed mergers present no competitive issues and offered research showing benefits to communities such as cost savings and quality improvements. Other studies challenge those assertions, finding instead that prices tend to rise in consolidated markets, and providers with the most market share have higher profit margins and costs per discharge.
NBER tracked patients transported to hospitals by ambulance. The study was supported by funding from the National Institute on Aging and used claims data from the Health Care Cost Institute, provided by Aetna, Humana and UnitedHealthcare. More than 200,000 admissions at over 1,814 hospitals between 2007 and 2014 were analyzed.
The researchers found that receiving care from an expensive hospital in a concentrated market resulted in higher spending but had no detectable effect on mortality, while higher prices equated to better-quality care at hospitals in relatively unconcentrated markets.
"To be clear, raising hospital prices will not lead to higher quality, mergers that raise prices do not lead to higher quality, and big systems that merge and have high prices do not have higher quality," study author Zack Cooper of the Yale School of Public Health and NBER said in a tweet.
In unconcentrated markets, the study showed care from hospitals with higher inpatient prices resulted in a 35% decrease in mortality, 53% increase in spending on the emergency episode and 22% rise in one-year total health spending. The hospitals spent an additional $1 million on non-deferrable emergency cases for each life saved.
The researchers concluded that allowing hospitals to compete, and prices to be determined by the market, "is not necessarily wasteful" in areas with less concentration. Regulating hospital prices in unconcentrated markets could lead to a reduction in quality, they cautioned.
On the other hand, regulating prices in concentrated markets could be successful, potentially holding down rents hospitals can command due to their bargaining power — if prices were set high enough that they did not harm quality, the report said.
"As policymakers consider price regulation, they must balance the goal of reducing prices with maintaining and incentivizing improvements in providers' quality," the authors wrote.