Hospital prices play key role in health spending variation

Researchers: Most price variation attributable to 'unexplained' differences

February 16, 2012

Hospital and provider price differences account for one-third of overall health care spending variation among insured U.S. residents, according to a new Center for Studying Health System Change (HSC) study.

For the study, researchers examined 2009 claims data for 218,000 active and retired nonelderly unionized autoworkers and their dependents. Overall, they found that health spending per enrollee varied significantly across 19 communities despite essentially uniform benefits.

The researchers determined that two-thirds of overall spending variation could be attributed to differences in service quantities. Although those differences mostly could be explained by demographic factors, the researchers found that about 18% of variations in service quantities occurred for unexplained reasons. 

Meanwhile, researchers attributed the remaining third of overall spending variation to differences in provider prices.

For example, they determined that average hospital inpatient care prices were 55% higher on average for insured autoworkers than for Medicare patients. However, that percentage varied significantly by community: autoworker prices for inpatient care in Syracuse, N.Y., and St. Louis were only 30% higher than Medicare prices, while autoworker prices in Lake County, Ill., were two-and-a-half times higher.

According to the study, most of the variation in provider prices was unexplained and could not be attributed to the cost of doing business (HSC release, 2/15; Evans, Modern Healthcare, 2/15 [subscription required]).

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