Where there’s a hospital monopoly, private health care costs more

A new study has found that health care costs for those with private insurance varies wildly across the U.S.—and that much of the variation has do with how much market power is held by local hospitals.

While most previous studies have analyzed health care costs using data from government insurance programs, especially Medicare, the new study looked at data from private insurers.

“When your grocery store is the only one in town, it can jack up prices without losing customers,” wrote Atul Gawande, professor in the Department of Health Policy and Management at Harvard T.H. Chan School of Public Health and executive director of Ariadne Labs, commenting on the new study in a December 18, 2015 New Yorker article. “The same goes for hospitals. The study found that hospital prices in monopoly markets are fifteen per cent higher than in those with four or more hospitals.”

He added, “The bigger the hospital, the more it can adopt systems that deliver better-organized, higher-quality, less-wasteful care. But the bigger the hospital, the more power it has to raise prices.”

Read Gawande’s New Yorker article: Health Care’s Price Conundrum

Learn more

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