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).

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