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Hospitals now own 2/3rds of Private Medical Practices.

National Review: Hospitals to Blame for “Obscene Health-Care Costs”

Hospitals now own 2/3rds of Private Medical Practices.

Image courtesy of [cooldesign] / FreeDigitalPhotos.net

A new article in National Review says that “Hospitals are to blame for obscene health-care costs.”According to the article, “If the Congressional Budget Office’s projections are right, health care will account for almost all increases in government spending for the foreseeable future, excluding interest on the debt. And increasing spending on hospital care is the biggest driver of rising health-insurance premiums, which are in turn the main cause of wage stagnation for middle-income Americans.”

The article notes, “The average hospital stay in the developed world costs $6,222. In the United States, the average hospital stay costs $18,142. That’s true even though the average hospital stay in the U.S. is only five days long, two days shorter than the OECD average. You might guess that the extra $12,000 pays for whiz-bang technology or extra services that Europeans don’t use, but studies have shown that most of the difference cannot be explained by such factors. American hospitals simply charge higher prices.”

So how are hospitals continuing to increase costs? One way that we’ve highlighted on the blog is through provider consolidation, which can in turn increase hospitals’ market share and leverage with private payers.

As the article notes, “Hospital monopolies and oligopolies use their market power just as other monopolies do: to raise prices. James Robinson of the University of California looked at six common categories of hospital procedures, such as pacemaker insertions and knee replacements, and compared what hospitals charged for those procedures. He found that hospitals in markets with above-average HHI scores — the highly consolidated ones — charged 44 percent more than their brethren in markets with below-average HHI scores. And nearly all of that extra revenue from higher prices went straight to hospitals’ bottom lines, where it could be used to pay higher salaries, build new wings, and swallow smaller competitors.”