Center for American Progress

RELEASE: New Report Shows How Hospitals Raise Prices for Private Insurance
Press Release

RELEASE: New Report Shows How Hospitals Raise Prices for Private Insurance

Washington, D.C. — Today, the Center for American Progress released a new report that looks at hospital prices and profits, including how they vary by payer, ownership, and over time. The report finds that hospital profits have surged to their highest level in two decades, making the industry more profitable than both the health insurance and pharmacy industries. Additionally, an increase in hospital mergers and the consolidation of physicians within hospital services have resulted in higher prices for patients. Other key findings include:

  • In 2016, the 3,062 nonfederal, acute care hospitals in CAP’s analysis made $63.6 billion (a 7 percent profit margin)—fueled predominantly by the for-profit hospital sector, whose profit margins are more than twice those of public hospitals and 57 percent higher than nonprofit hospitals.
  • Combining the American Hospital Association-reported payer mix with published estimates of rates relative to Medicare, hospitals receive approximately 134 percent of Medicare rates across their main payers. This figure is overwhelmingly driven up by prices charged to private payers who make up one-third of all patients and pay hospitals far more than the cost of health care services.
  • The price of procedures varies widely by geography and the proportion of patients with private insurance, as higher market power wielded by hospitals—who negotiate payments directly with insurers—results in payments well exceeding the cost of care delivery.

To reign in excessive hospital costs, boost competition, and protect consumers, the report recommends policymakers consider the following actions:

  • End abusive hospital billing practices, including surprise billing and excessive charges
  • Implement reference pricing to incentivize patients and put pressure on providers
  • Implement rate regulation, setting or capping all payers’ rates closer to costs
  • Call for more public information on hospital pricing
  • Enforce more antitrust measures for the hospital industry
  • Impose site neutrality for payments

“Reigning in the cost of health care in America will require rethinking how hospitals are paid and the rates at which they are reimbursed,” said Emily Gee, health economist at CAP and author of the report. “This report makes a compelling case for enlarging the role of public payers and taking action to reduce costs for Americans covered by commercial insurance.”

Related resources:

Please click here to read “The High Price of Hospital Care” by Emily Gee.

For more information or to speak with an expert, please contact Colin Seeberger at [email protected] or 202.741.6292.