• Massachusetts’ AG on Health Care Costs

    Massachusetts Attorney General Martha Coakley released a report on March 16 on health care cost drivers in the state. A few findings pertaining to prices paid by insurers to hospitals and physician groups are notable.

    Price variations are not correlated to (1) quality of care, (2) the sickness of the population served or complexity of the services provided, (3) the extent to which a provider cares for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

    Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers. …

    Price increases, not increases in utilization, caused most of the increases in health care costs during the past few years in Massachusetts.

    Higher priced hospitals are gaining market share at the expense of lower priced hospitals, which are losing volume.

    So, shorter: (A) It’s the prices, stupid (not volume). (B) It’s about market power, stupid (not levels of payment by public programs). (C) We’re not paying for quality, stupid (not yet anyway).

    • Our local experience is that the largest local hospital drives fees. Once they push them up, the rest of us benefit. My hospital had tried to gather more business for many years by holding down charges. Our outcomes were as good or better, but our share of the patient population did not change. We raised charges to equal our competitor, our number of patients stayed the same, and we made a lot more money. As far as I can tell, insurance companies are fairly price insensitive or they have no influence on where their patients go for care.