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Hospitals With Monopolies Are Way More Expensive

Dec 22, 2015

A new survey of hospital prices across the United States found massive price hikes in markets in which one hospital enjoys a monopoly.

Analyzing insurance claims from 2007 to 2011 covering more than a quarter of individuals with private employer-sponsored health insurance in the United States, researchers from a consortium of universities found that prices in hospitals that have a monopoly on hospital care in their market are 15.4 percent higher than prices in markets with four or more hospitals.

Hospital pricing schemes are notoriously opaque, with rates negotiated privately between insurers and hospitals and held as closely guarded trade secrets. “As a result,” the authors write, “there is a great deal that is unknown about how and why health care providers’ prices vary across the nation and the extent to which providers’ negotiated prices influence overall health spending for the privately insured.”

The report also finds a wide disparity and little correlation between the prices charged to Medicare patients—which are public—and those charged to the privately insured, contradicting the widely accepted belief that prices charged to Medicare patients across the U.S. are a useful approximation of healthcare prices overall. Grand Junction, Colo., for instance, has been held up by President Obama as a model healthcare market due to the city’s low Medicare costs, but the report found significantly higher prices charged to the privately insured. Grand Junction and the western Colorado region around it are served primarily by a single hospital.

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