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Higher Hospital Costs May Not Mean Better Care

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Teaching hospitals made up nearly half of all the high-priced hospitals but only 17 percent of low-priced hospitals. The expensive hospitals tended to be in places where competitors were near rather than regions where they were the only facility around, even though in those isolated places insurers have no other options and therefore less negotiating leverage.

The researchers found partial justification for higher prices charged by these hospitals. They tended to treat sicker and poorer patients, often received referrals from other hospitals and were more likely to offer specialized, expensive services. And their operating margins were worse: the average loss was 2.8 percent, while low-priced hospitals had an average operating profit margin of 1.5 percent.

But when the researchers factored in all sources of revenue, including donations and investments, they found the total margins for high-priced hospitals were a healthy 4.5 percent, statistically no different than those of low-priced hospitals.

 

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.

Wed, Jan 29 2014

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