COPN Update: Hospital Monopolies Charge 15% More

Image credit: Washington Monthly

Image credit: Washington Monthly

As the General Assembly debates a rollback of the Certificate of Public Need (COPN) process, a new study has found that markets served by monopoly hospitals charge privately insured patients 15.3% more on average for a variety of routine procedures than  hospitals do in competitive markets.

“Hospital market structure stands out as one of the most important factors associated with higher prices, even after controlling for costs and clinical quality,” write the authors of “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” published by the National Bureau of Economic Research.

The study is germane to Virginia’s COPN debate because state regulations impede the entry of new competitors in the medical marketplace. Most metropolitan markets in the state are monopolies or near-monopolies in which a single health care system own a dominant market share and enjoys pricing power in negotiations with private insurers.

If you want to know the premium that employers and patients pay in monopoly markets, 15% is a good rule of thumb. Employers/patients pay a roughly 7% premium in duopoly markets, and a 5% premium in triopoly markets. The price differential for Medicare is smaller because the federal government exercises monopolistic buying power (technically, that’s called a monopsony) and sets take-em-or-leave-em rates.

— JAB

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7 responses to “COPN Update: Hospital Monopolies Charge 15% More

  1. here’s a question for you. What if – that’s how hospitals with a lot of charity care – pay for it?

    and not only Medicare – read on:

    ” Patient First no longer taking some Anthem health plans in dispute over reimbursements”

    http://www.richmond.com/business/local/article_8318c070-4cbb-58a4-9a06-953a4205dfce.html

  2. Let me tell you a little story.
    A few years ago our local cardiology practice decided to go under the Centra umbrella because they said they could get a better insurance rate. So their property immediately became tax exempt costing the Lynchburg taxpayers an additional $75,000 a year (you know City Council didn’t cut spending).
    Well a few months ago I went in for a checkup, nothing wrong thankfully, and got my bills. Yes bills. The first was from the cardiologist for, maybe $150, gotta pay for his schooling. The second was from Centra for $219 for a FACILITY CHARGE!
    No, I didn’t go to the hospital, just went to the Dr’s office like always.
    Now Centra keeps taking in the independent practices all around town, removing them from the tax-paying roles, socking it to us, all the while claiming to be a non-profit.

    This monopoly practice has to stop!

  3. Yes that sounds about right. I’m one of those hit up.

  4. HCJ – did you use the facility?

    😉

    and you got to see a cardiologist for a mere $150.00?

    did he do any cardio stuff?

    the thing is all hospitals and practices get what they can from insurance reimbursement then they go for whatever else they can get – in part because of non-payers.

  5. I think the COPN issue reveals ignorance and hypocrisy.

    You cannot have a situation where hospitals are mandated to provide treatment to people who do not pay – and expect the hospitals to not find whatever ways they can to recover those costs. To not do so would be recklessly irresponsible -yet the COPN folks seem obvlious …

    Second – there is no free market in health care to begin with. Yes, when someone wants a tummy tuck or cosmetic surgery – any kind of optional and discretionary services the free market could work but even then unless services fees have to be disclosed – it’s not really a truly free market… and I can tell you I found that out in trying to have some oral surgery done recently – not even really optional – there needed to be some biopsy and pathology work done – and trying to find prices for the work was a cruel joke – at best.

    COPN is not going to help when someone who can’t pay has to have a diagnostic image done where the cheapest rate is still a non-starter – they can’t pay so they will go to the ER to have it done – the ER where Virginia state legislators will insist the ER provide the free service to the non-payer – but not charge a penny more that the lowest free-market price in the area.

    How in the world does it make any sense what-so-ever to do the COPN in that kind of “thinking” environment where after all is said and done – the hospital still has to provide services to the non-payers and they are left with one less option to try to find a way to pay for it?

    this is the kind of senseless ideological nonsense that conservatives pursue these days… they don’t seek answers – they seek mandated legal purity of their ideology… and if it harms hospitals and people – tough cookies – and the way forward is to stop the free services…

    it boggles the mind…

  6. I would agree the AD was probably over the top and in turn not be helpful to discussions – in the very same way that Howell and company have demagogued the MedicAid Expansion.

    the moral of the story is that the behaviors of some – leads to more of the same… for others…

    if you did have the expansion – it would likely be much more compatible with COPN because it would relieve the pressure on the hospitals at least a little to try to find other means to recoup costs from non-payers.

    the ideological “my way or the highway” approach is not helpful either..

    the fundamental reality that must be addressed by those who are responsible and rational is how are you going to deal with the health care costs of those who do not have insurance – or more to the point – the means to evolve to utilizing primary care – even if it is nurse practitioners and physician assistants to get preventative care, catch disease in the early stages and reduce costs of delayed cared delivered with costly ER services.

    reality demands solutions from grown-ups not ideological children running away … sorry

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