Hospitals Are Raising Prices as Quality Care Takes Back Seat

According to Bloomberg News, a 2010 analysis by the Massachusetts Attorney General found no correlation between price of care and the quality of care at hospitals. This assessment is solidified with a report published by Health Affairs that shows this is occurring throughout the country.  The theory that the larger a hospital is, the larger efficiencies it will generate, which in turn delivers more quality time and care with patients is continuing to lose its steam.

Due to the amount of mergers and acquisitions in the hospital sector, hospitals are now in control of a broader market space and have the ability to raise prices on their own accord.  In addition, with the purchase of individual practices and larger medical groups, hospitals are creating even more leverage for themselves in terms of pricing.  Specialists are in especially high demand because their procedures generate much greater revenue than an individual family practice physician.  Shannon Brownlee and Vikas Saini of Bloomberg News state that " with specialists on a salary, a hospital can charge its higher rates, and the parties split the increased revenue. Everybody wins, except patients and payers."

There is little doubt that hospitals are churning patients in and out while only thinking of shareholder profits.  This point was made clear with the recent case of Florida based Health Management Associates, Inc.  Emergency room physicians tend to be rewarded and punished based on meeting quotas on numbers rather than outcomes for their patients.

Multi-specialty Accountable Care Organizations that also focus on primary care physicians could be a solution to curbing hospitals’ ability to manipulate pricing and truly focus on quality care for their patients.

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Image via Matthew Staver for Bloomberg News