Basics of Hospital Pricing

Ian McCarthy | Emory University

What is a hospital price?

Defining characteristic of hospital services: it’s complicated!

What is a hospital price?

Lots of different payers paying lots of different prices:

Medicare fee-for-service prices
Medicaid payments
Private insurance negotiations (including Medicare Advantage)
But what about the price to patients?

Price \(\neq\) charge \(\neq\) cost \(\neq\) patient out-of-pocket spending

What is a hospital price?

What is a hospital price?

Not clear what exactly is negotiated…

Fee-for-service

price per procedure
percentage of charges
markup over Medicare rates

Capitation

payment per patient
pay-for-performance
shared savings

Hospital prices in real life

A few empirical facts:

Hospital services are expensive
Prices vary dramatically across different areas
Lack of competition is a major reason for high prices

Hospital prices in real life