Market consolidation in California

Yesterday, I discussed the idea of managed competition in California.  One of the original tenets of managed competition was insurers having integrated, mutually exclusive provider networks.  This would mean much more consolidation on the provider side.  While this could improve quality, there is also a risk that prices could rise.  In fact, this is what…

Hospital group purchasing and drug prices

Yesterday I noted that competition is key to driving down prices in health insurance markets.  Competition is about expanding the number of suppliers available for a given product.  Now let’s think about the demand side.  Does reducing the number of purchasers increase or decrease price?  One could think that price would fall because buyers would…

Do hospital purchases of physician practices increase or decrease prices?

The effect of health care industry consolidation on prices is a question argued about by many including researchers, economists, anti-trust, lawyers, regulators and more.  There is evidence that health plan consolidation increases premiums, and hospital consolidation increases price. For instance, Dafny et al. 2015 writes: The harsh reality is that it’s difficult to find well-documented…

Does episode-based payment reduce cost?

That is the question that Carroll and co-authors try to answer in their latest NBER working paper (WP #23926).  They examine the Arkansas Health Care Payment Improvement Initiative (APII), which is a state-wide, multi-payer episode-based program.  Unlike most episode-based payment (EBP) models, provider participation  in the program was mandatory (as of 2013).  NBER summarizes the program…

Measuring hospital quality requires understanding what a hospital is

Many programs–such as Medicare’s Hospital Value-Based Purchasing (HVBP) program–aim to reward hospitals with high quality through higher reimbursement and penalize hospitals with low quality through lower reimbursement.  Will this approach be successful? A commentary by McMahon and Howell (2017) says that hospitals are not really unified entities but rather a collection of workshops. Thus, the…

Why are hospital prices crazy?

Sarah Kliff of Vox has an interesting article looking at hospital pricing.  She provides examples of $629 for a Band-Aid in an emergency department to over $3,000 to look at a bruised finger. Part of these high costs are not just physician time and treatment materials but a facility fee.  The facility fee is basically the…