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Hospitals Immune to Recession

Hospital prices continued to climb during the Great Recession. The unanswered question, however, is why?

By Alan O'Rourke | Creative CommonsAs the stock market fell to begin the Great Recession, hospital charges to patients and insurance companies rose.  A recent article in the American Journal of Managed Care described the price of hospital charges and how these charges changed from 2008 to 2010.  Data were reviewed from more than four million hospital admissions for patients with private health insurance; data were divided by the location of the patient and inciting health problem leading to admission.  This study was purely descriptive, drawing very few conclusions or analyses.  In many ways it proves more useful to look at this raw pricing data rather than trends in health care spending as a whole or trends in insurance premiums, as those latter trends encompass numerous intangible factors.

The authors estimated that hospital prices per admission rose from $13,016 in 2008 to $15,236 in 2010, an average annual growth rate of 8.2%. After adjusting for increased intensity of services – length of stay, more procedures per admission, enhanced technology use, and increased frequency of medical comorbidity – the average hospital charges for inpatient admission still increased 6.6% per year.

When displayed by subcategory, the data yield more questions than answers.  Among common admission diagnoses, one whose price increase was the greatest was spinal fusion which increased an average by 14.9% per year.  Chest pain admissions increased in price by 13.7% annually.  Conversely, the price charged for the most common admission diagnosis, vaginal delivery, only increased an average of 5.4% per year.

Price increases in rural areas seemed to occur at about the average rate for the country, whereas price increases in urban areas often occurred at a drastically lower or higher rates than the national average. Price increases varied widely between the states, with prices in New York increasing 12.7%  while prices in Arkansas only increased only 1.0% annually. Large variations also existed within states. For example, prices charged for inpatient admission increased Fort Worth, TX by 9.1% annually, whereas prices in Houston, TX increased only 2.8%.

Commentary

Although the study does not attempt the answer the “why” question, it cannot help but be asked. Why were hospitals able to charge much more in 2010 than they did in 2008 despite the overall economic slump affecting the rest of the country?

Since this study looked at admissions of patients with private health insurance and examined the allowed charges by insurance companies combined with any patient coinsurance, the “why” almost certainly pertains to the various market forces between insurance companies and individual hospitals.  Perhaps in cities with significantly increased allowed charges, there was a lower density of hospitals. If so, then less competition among hospitals would prevent insurers from driving down charges.  Thus prices would climb. Alternatively, maybe cities where hospital charges grew most rapidly have hospitals that specialize in certain services, such as orthopedic hospitals specializing in spinal fusions or advanced chest pain centers.

Regardless, the pure depth and breadth of information provided by this study will doubtless prove instrumental in delving into the “why” this segment of the health care economy diverged from the reality of the rest of the national economy during the Great Recession.

Lemieux, J and Mulligan, T. Am J Manag Care. 2013; 19 (3): e106-e113.

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Lisa Maurer, MD

Lisa Maurer, MD
About Lisa Maurer, MD

Dr. Maurer is an attending physician with Emergency Medicine Specialists in Milwaukee, WI where she serves as Legislative Liaison. Contact: Facebook | More Posts