Limiting hospital value regulation to concentrated markets would miss the worst offenders
Policymakers have launched proposals to fight excessive and rising hospital costs, however specializing in high-concentration markets doubtless misses the mark.
The vast majority of high-price hospitals are lively in markets that meet federal definitions of low or reasonable focus, in line with a not too long ago revealed industrial claims evaluate.
As such, value regulation coverage proposals that particularly goal concentrated hospital markets would solely affect a minority of hospitals charging the best costs for his or her providers, Harvard-affiliated researchers wrote in Well being Affairs.
Policymakers would as an alternative be simpler in the event that they centered their interventions straight on limiting excessive supplier costs with out regard to a hospital’s surrounding market, researchers wrote.
“Policymakers may begin with modest approaches, equivalent to capping the best costs, monitoring outcomes and steadily pushing the caps downward, and monitoring trade-offs between financial savings and any unintended penalties for entry or high quality,” they wrote.
The researchers’ evaluation used Well being Care Price Institute claims information for roughly 1 / 4 of the U.S. commercially insured inhabitants throughout 2017 to construct an inpatient and outpatient value index for particular person basic acute care hospitals.
To find out a hospital’s Herfindahl-Hirschman Index (HHI)—a measure of market density utilized by the Federal Commerce Fee (FTC) and launched laws concentrating on high-concentration hospital markets—the group appeared to admissions numbers reported by means of the 2017 American Hospital Affiliation (AHA) Annual Survey.
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The researchers discovered that greater than 1 / 4 of all hospitals they deemed to be charging excessive costs fell inside unconcentrated markets, or these with an HHI under the FTC’s cutoff rating of 1,500.
About 17% and 13% of high-price hospitals offering inpatient and outpatient providers, respectively, have been situated in extremely concentrated markets with HHIs exceeding 4,000—markets that additionally they famous contained a few third of the hospital referral areas included within the pattern.
“To a point, this consequence displays the truth that extra concentrated markets have fewer suppliers—slightly below 13% of hospitals in our pattern have been situated in markets with HHI larger than 4,000—however it additionally displays the fact that high-price suppliers have been prevalent throughout the spectrum of market focus,” they wrote.
Worth regulation insurance policies which might be primarily based on market focus may change into simpler by narrowing market definitions in order that extra areas are categorized as noncompetitive and extra hospitals qualify for regulation, they wrote. Nonetheless, the evaluation suggests {that a} honest variety of the hospital trade’s worst offenders would stay unaffected, strengthening the argument for approaches that straight handle the end result of curiosity.
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“Insurance policies that handle excessive costs whatever the underlying market construction could be extra in line with a coverage aim of constraining excessive costs,” the researchers wrote. “In some instances, these insurance policies could entail selling competitors between hospitals in the identical market, but when there are usually not sufficient hospitals in a market or if procompetitive insurance policies are usually not profitable at decreasing the higher tail of the worth distribution, regulation specializing in the costliest suppliers could also be wanted.”
Rising hospital costs are a significant concern for policymakers and have led to, amongst different efforts, elevated scrutiny on supplier consolidation as a supply of the will increase.
The FTC introduced plans to review the affect of those offers again in January and obtained an additional nudge from President Joe Biden’s July government order.
The latter motion shortly drew responses from supplier teams just like the AHA and the Federation of American Hospitals, every of which characterised the order as misguided and a possible supply of pointless bureaucratic purple tape.
