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Higher Hospital Costs May Not Mean Better Care

WebMD News from Kaiser Health News

By Jordan Rau

Wed, Jan 29 2014

A study of autoworker claims found that hospitals with the highest prices tended to have the strongest reputations and tight holds on their local markets yet showed little evidence of providing better quality care.

The actual prices insurers pay hospitals are closely guarded secrets in health care. That has made it hard for health researchers to study one of the most important issues: whether patients get better treatments from more expensive hospitals. Hospital list prices, which Medicare published last year, provide no indication about how much hospitals actually are compensated by private insurers.

In this study, published online Wednesday in the journal Health Affairs, researchers got a rare peek into hospitals’ real prices by analyzing nearly 25,000 insurance claims filed by current and retired auto workers in  10 metropolitan markets: Buffalo; New York; Cleveland; Detroit; Flint, Mich.; Indianapolis; Kansas City; St. Louis; Toledo, Ohio; Warren, Mich., and Youngstown, Ohio.

The workers went to 110 hospitals, which the researchers divided into three categories: 30 low-priced hospitals (with prices 10 percent or more below average); 30 high-priced hospitals (10 percent or more above average); and 50 medium-priced hospitals. The researchers adjusted their analysis to account for the different ailments that brought patients to the hospitals.

The study found high-priced hospitals were twice as large as the low-priced hospitals. Their market shares were three times as large as the low-priced hospitals, often through affiliations with large health systems. Market dominance is one of the major explanations for why some hospitals are able to extract higher prices from insurers during negotiations, since the insurers are reluctant to irk consumers by leaving these hospitals out of their networks.

The expensive hospitals were much more likely than other hospitals to win a national ranking for high quality from U.S. News & World Report, which relies strongly on doctor surveys in its analyses. In fact, the researchers found that none of the low-priced hospitals showed up on any U.S. News lists, while one out of four high-priced hospitals showed up on the list.

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