iFHP cost report highlights cause for concern over lack of provider competition
The International Federation of Health Plans (iFHP) today released its 2015 Comparative Price Report, detailing its annual survey of medical prices per unit. Designed to showcase the variation in healthcare prices around the world, the report examines the price of medical procedures, tests, scans and treatments in seven countries.
In the U.S., prices were taken from over 370 million medical claims and more than 170 pharmacy claims reflecting costs negotiated and paid to providers.
As Vox's Sarah Kliff and Soo Oh note in their analysis of the study, the healthcare prices shown are "out of control." For example, on the drug pricing side of the study, Humira (a drug to treat rheumatoid arthritis) cost an average of $2,669 in the U.S. for a 28-day supply, compared with low end of the cost spectrum at South Africa's $552 for the same prescription.
On the hospital cost side, the report found that, on average, hospital cost per day in the U.S. was $5,200 with $17,358 on the high end in the U.S. (95th percentile) and $1,494 on the low end (25% percentile). This can be compared with Spain's $424 average hospital cost per day, according to the study's results.
“We look at these numbers every year and it’s always a shocking demonstration of how much procedures and prescription drugs actually cost,” iFHP’s Chief Executive Tom Sackville said in a prepared statement. “There is no reason why identical procedures and products should vary in price so much across countries: it illustrates the damaging effects of an inadequately regulated healthcare market.”
Sackville told Healthcare Dive, "It's really hard to see why one country -- the payers, insurers -- should be paying three or four times more than in another and the answer must be failure of competition." He added, "Some people are getting away with prices that are far too high and there's no clinical justification for the variation."
A fragmented system?
The report undercuts the idea of what's being played out in the recent Sutter Health case which alleges the health system is overcharging insurers causing medical costs to be pushed downstream to patients. Last Friday, the suit was allowed to seek class-action status.
Matthew Cantor, partner and attorney at Constantine Cannon and lead lawyer for the plaintiffs, told Healthcare Dive the plaintiffs allege to have contracts which require health plans to purchase all the hospital services that Sutter provides in Northern California.
Sutter is "leveraging its larger power in those markets to say to these health plans that they have to also purchase Sutter Health hospital services elsewhere and not only do they have to purchase them but they have to purchase those Sutter services at higher, super competitive prices," Cantor said, adding that this, in turn, raises the costs of medical services to health plans. These higher costs, Cantor said, are then sent downstream to insurance policyholders.
"Competition is not working," Sackville told Healthcare Dive. "The market's not working because if it was, no one would get away with charging $17,000 [for a day of hospital care]."
The report put a focus on the lack of provider competition and consolidation. There's been a fair amount of consolidation in various states and more systems are pursuing the idea of mergers or partnerships. Such activity, in theory, could bring down competition in an area and tick up costs for consumers as hospitals' market power grows. "Powerful hospital systems have the ability to raise the prices of medical care. Health plans have no alternative but to take these forced, higher costs upon them because [if they refused] then no one would buy their insurance," Cantor told Healthcare Dive.
Sackville echoes this comment saying most payers are "paying what the providers ask for."
What can be done?
If competition is not working naturally, then regulators are supposed to enter and tamp down antitrust concerns. Because healthcare can be so politicized, change can be difficult. Currently, providers and insurers negotiate prices between themselves. Potentially, regulators could step in to help better negotiate prices in the face of provider consolidation.
"Starting from now, we're looking at a historic consolidation of providers in the United States and a lack of intervention by the regulators who in other in other sectors" might play a more active role in antitrust efforts, Sackville notes, adding, "I think the reason these prices are very high stem mainly from the fact that providers are very good at pushing out prices. Perhaps there is not real competition operating between them in many states."
"I think there has to be a change of policy from the top or this trend in prices is likely to go on up," Sackville concluded.
Follow Jeff Byers on Twitter