A new Washington Post investigation highlights a major driver of rising health care costs that too often escapes scrutiny: The same care can cost dramatically different amounts depending on where patients receive it, with hospital consolidation and growing market power helping drive those price differences.
The investigation found that hospitals with fewer competitors can command substantially higher prices from insurers and patients.
Consider this: The Washington Post compared the price of a knee replacement under the same Blue Cross Blue Shield health plan at two North Carolina hospitals. At one hospital, the procedure cost about $16,000, at another hospital—which has little local competition following a merger of the region’s two largest hospitals—it cost roughly $40,000. The pattern extends beyond one procedure or one market. The story points to similar price disparities across multiple states and services.
Why this matters: Those higher costs do not stop with the patient receiving the care, they ultimately flow through to employers, workers and families in the form of higher premiums and health care costs.
The big picture: Decades of hospital consolidation have left many communities with fewer choices and dominant health systems with greater leverage to demand higher prices from patients and insurers with no alternatives. Hospital prices have risen faster than prices in any other sector of the economy over the past quarter century, according to the Washington Post, making hospital costs an increasingly important part of the affordability conversation.
It’s not just consolidation: The 340B program’s lack of transparency and oversight has allowed large hospital systems to generate additional revenue with little accountability for how those dollars benefit patients. Hospitals eligible for 340B can purchase medicines at steep discounts, charge insurers and patients higher amounts and pocket the difference, without any requirement that patients benefit from the savings.
This drives up costs for patients, employers and taxpayers while creating another lucrative revenue stream for large hospital systems.
The bottom line: Policymakers looking to lower health care costs must address the role hospitals play in driving spending and premiums higher. Greater competition, transparency and accountability across the hospital sector, including in programs like 340B, are critical to making health care more affordable for patients, employers and taxpayers.
Learn more at PhRMA.org/340B.
Eliza Maciag
Eliza Maciag is a senior manager on PhRMA’s Public Affairs team, focusing on 340B, PBMs and the cost and value of medicines. Prior to joining PhRMA, she worked in the Strategic Communications department at the Investment Company Institute, where she led rapid response initiatives and grassroots campaigns. Eliza holds a bachelor’s degree in political science from Trinity College (CT) and a master’s degree from the Graduate School of Political Management at George Washington University.
Originally from Connecticut, Eliza is based in Washington, D.C. Outside of work, she enjoys golfing, biking, skiing and swapping book recommendations.