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Healthcare worker holding hands with patient on Hospital Gurney in hospital corridor. Photo by Medioimages/Photodisc

Some hospital prices rose over 40 percent in less than a decade. Will this new rule help?

For years, U.S. health care costs have been on the rise, making up a massive chunk of the national economy.

But what, and who, are propelling those costs upward right now?

A new study published in Health Affairs on Monday could help answer that question; it finds that prices for services at hospitals rose far more than those by physicians during the same time period.

In 2017, spending rose nearly 4 percent and accounted for nearly a fifth of the nation’s gross domestic product, according to federal data. Of that $3.5 trillion spent, a third came from hospital care, the Centers for Medicare and Medicaid Services reported.

On Tuesday, President Donald Trump is expected to devote part of his State of the Union address to highlight the need for lower health care costs. One part of his administration’s plan to bring down those costs has been to make hospital price lists more publicly accessible.

High health-care costs have consequences for average Americans: one out of six are estimated to have past-due medical bills, according to a July study published in the journal Health Affairs. Of those, millennials accrued the most medical debt, the study suggested.

But are spreadsheets of hospital prices that critics say virtually no one pays the answer? Here’s what the latest research shows, and what experts think about recent efforts by the Trump administration to bring transparency to hospital pricing.

What the study says

For hospital-based inpatient care, prices set by the hospitals rose 42 percent between 2007 and 2014, according to the study. During those same seven years, prices set by physicians for inpatient care at hospitals grew 18 percent. For outpatient services, hospital prices went up 25 percent, while physician prices increased by 6 percent, the study said.

Researchers discovered this contrast by analyzing negotiated pricing data — what most people pay instead of the prices that hospitals list — from the Health Care Cost Institute, as well as Aetna, Humana and UnitedHealthCare, according to Zack Cooper, the study’s lead author. This posed a study limitation since it includes just three of the nation’s five largest insurers, Cooper said. Claims in the dataset represented 28 percent of all Americans with employer-sponsored health insurance. Nationwide, more than half of Americans — 56 percent — report having health insurance coverage through their employer, according to the U.S. Census.

In addition, claims weren’t measuring for quality of care — another limitation of the study, he said. Essentially, this idea implies you get what you pay for in health care and is raised in debate about discrepancies in health care spending.

Why are hospital prices rising?

Cooper, an associate professor of public health and economic at Yale University, blames health care system consolidation for “choking off growth in the rest of the economy.” He says when smaller institutions are absorbed by larger hospital networks it can create monopolies and remove incentives to keep costs down.

“These waves of hospital consolidation has broadly benefited no one but hospitals,” he said.

The American Hospital Association defends hospital mergers, saying they “decrease costs,” may “expand scope of services available” and may “drive quality benefits.”

Another reason for the higher rise is that while physician prices tend to be tied to what Medicare mandates, hospital prices are not, according to Cooper. Seeing that the prices that are subject to some regulation rose more slowly “gives a good nudge to policymakers about where they should focus their efforts.”

How the Trump administration tried to tackle hospital prices

Under new rules that went into effect this month, hospitals must post online their standard prices for services, also known as a hospital’s chargemaster. The changes also require:

  • Improving access to electronic health records: This update is aimed at removing roadblocks for medical providers to see a patient’s medical history.
  • Dismantling measures within the Inpatient Quality Reporting Program that the Trump administration calls “duplicative.”
  • Reducing administrative need for documentation.

Is the data now available? According to guidance from the Department of Health and Human Services, hospitals nationwide had to post these numbers online in a machine-readable format by Jan. 1, rather than having a physical copy ready for reference or a non-searchable PDF.

Who pays the prices listed on a hospital’s chargemaster? People without insurance — 27.4 million Americans, or 10.2 percent of the population — must pay medical expenses out-of-pocket and typically can expect to pay these prices, said Stephen Zuckerman, who directs the Urban Institute’s Health Policy Center. For those who have insurance, their costs of care are generally negotiated down to a lower price because they are part of a larger pool that can distribute the cost for services.

These efforts are part of a broader effort launched by the Trump administration to lower health care costs. On Friday, Health Secretary Alex Azar told the PBS NewsHour that his agency will bring greater transparency to prescription drug pricing rebates. But critics of the plan suggest it could result in higher health insurance premiums.

Why it matters

The hospital pricing data doesn’t have a practical application for most consumers. Few people actually pay the chargemaster’s listed price for a service, Zuckerman said. Most people are covered by some form of health insurance under an employer, a private plan, Medicare or Medicaid. So these prices are as realistic as car’s list price — very few people end up paying that amount.

But the newly mandated lists offer a glimpse at how two hospitals can charge different prices for the same procedure. From a public relations standpoint, a hospital would not want to be revealed as the most expensive place in town for a particular procedure, Zuckerman said. And that information could provide an important first step toward greater accountability and price transparency in health care, said Shawn Bishop, vice president for Controlling Health Care Costs and Advancing Medicare at The Commonwealth Fund.

“Employers are starting to awaken [to the fact] that their premiums are being driven by prices,” and may reconsider whether their health plans are really negotiating on their behalves, Bishop said.

The public, policymakers, health care providers and insurers “need to have a real conversation about what is shoppable in health care,” said Molly Smith, vice president for coverage and state issues forum for the American Hospital Association. People sometimes forget how often health care is shrouded in uncertainty, she said.

And it’s tricky to price-shop during an emergency, whether it’s rushing to the emergency room for an appendectomy or mending a broken arm after an ice-skating accident.

The costs associated with one-off services, such as X-rays or MRIs, are easy to predict, Smith said, but mapping out the price of care for an entire hospital stay following, say, a heart attack quickly becomes complicated based on the types of services and medications used, as well as a patient’s current state of health. In other words, knowing the theoretical price of a hospital’s medical procedure is not like having a set price for other consumer products, Smith said.

Looking at his own research, Cooper is skeptical about the Trump administration’s call for hospitals to post their prices online, saying it “places almost no pressure at all” on hospitals.

“Asking hospitals to post their made-up prices isn’t going to do a whole lot to rein in private health spending,” Cooper said.