New AHIP Report in AJMC Highlights Rising Prices for Hospital Services, 2008-2010

Data Shines a Spotlight on Hospital Price Trends for Specific Procedures and in States and Metropolitan Areas

Washington, D.C. — A new study published in the March issue of The American Journal of Managed Care (AJMC) provides new data on trends in hospital prices across the country. The report, conducted by researchers at America’s Health Insurance Plans (AHIP), found that from 2008 to 2010 inpatient hospital prices increased 8.2% per year with wide variation in price levels and growth rates across states and localities.

The new study, “Trends in Inpatient Hospital Prices, 2008 to 2010,” addresses a critical gap in the ongoing health care cost debate. “Despite the keen interest in US health care costs, there is surprisingly little detailed public information available on one of its key components: transaction prices paid by commercial insurers for inpatient hospital care,” according to the study's authors.

Using claims data from the commercially insured population under 65, the authors developed estimates of price levels and growth rates based on admissions (service), state, and locality. The authors concluded that unadjusted prices for inpatient hospital care rose 8.2 percent per year during the 2008-2010 period. Taking into account the complexity of treatment and the number of procedures performed, the authors estimate that 1.3 to 1.9 percentage points of this increase could be attributed to increased intensity per admission. Thus intensity-adjusted price increases ranged from 6.2 to 6.8 percent annually during this period.

“The price of health care services is the major driver of overall health care cost growth,” said AHIP President and CEO Karen Ignagni. “To make health care coverage more affordable for consumers and employers, there needs to be a much greater focus on the underlying cost of medical care.”

The new report highlights which common medical procedures saw the highest growth in prices during the period studied. Overall, the price for a spinal fusion increased the most (15.2 percent per year) between 2008 to 2010. That was followed by bronchitis and asthma treatment (10.3 percent per year) and uterine laparoscopic procedure for non-malignancy (9.8 percent per year).

The report also found wide variation in hospital prices across states and localities. The chart below shows the top ten states with the highest annual rate of growth from 2008 to 2010. Hospitals in New York increased their prices the most with prices rising on average more than 20 percent from 2008 to 2010, an annual growth rate of 10.5 percent. Texas (9.3 percent annual growth) and Tennessee (8.8 percent annual growth) also saw higher-than-average increases in hospital prices.

Moreover, hospital prices varied significantly among metropolitan areas within a state. The chart below highlights which metropolitan areas saw the greatest increase in hospital prices. Some of the metropolitan areas listed, such as Buffalo-Niagra Falls, are from the higher-cost states listed above. Other areas, such as Kansas City, MO/KS, are experiencing price increases far above the rest of the state.

The new report in AJMC is consistent with other data on hospital price increases. A recent report from the Health Care Cost Institute found that “despite some increases in utilization, spending growth was driven primarily by increases in the prices paid. ” Last year, the S&P Healthcare Economic Composite Index showed the average per capita cost of hospital services in the commercial market had increased by nearly 8 percent.

Hospital Consolidation Results in Higher Prices for Services

Data show that increasing provider consolidation is one contributor to rising hospital prices. When hospitals consolidate, either merging with other hospitals or buying up physician practices, they have greater negotiating strength and competition is limited. The result is higher prices for services, higher costs for patients, and often no improvement in the quality of care delivered. AHIP recently filed an amicus brief on the impact of hospital consolidation in the Court of Appeals for the Sixth Circuit in support of the Federal Trade Commission (FTC).

Health Plans Leading Way in Delivery System and Payment Reform

Health plans continue to take a leading role in delivery system reform to improve care coordination and align payment incentives to reward quality over volume. By partnering with providers and hospitals, health plans are building on the collaborations essential for promoting a high-value health care system. Moreover, research shows these innovative programs and services are delivering results by preventing unnecessary hospital readmissions, promoting health and wellness, and delivering coordinated care for patients when they need it.

To view the full AJMC report, click here.