As hospitals raise their prices, U.S. workers and businesses suffer

Despite a recent taxpayer-subsidized boon, the hospital industry spent the last several months lobbying for additional federal dollars amid warnings about the continued spread of Covid-19 and inflation’s impact on the nation’s health care system. Those efforts bore fruit: Medicare recently granted hospitals the largest price increase since 1998.

Never mind that the supply chain challenges and rising costs facing hospitals fundamentally are no different than the economic pressures confronting virtually all U.S. businesses. Instead of more effectively managing costs and improving efficiencies, hospitals expect taxpayers, businesses, and America’s workers to subsidize their cash flow and profitability.

To be sure, hospitals and the clinicians who staff them have labored mightily for two-and-a-half years to preserve life amid a disastrous global pandemic. Frontline health care workers deserve our gratitude for their heroic efforts under the most extraordinary circumstances.

But U.S. hospitals have already received more than $170 billion in direct government aid since 2020. For many, these subsidies supported near-normal profit margins despite sharp operational declines. Hospitals have also taken advantage of an estimated $100 billion in low-interest loans and likewise enjoyed a 20% boost in Medicare reimbursements for inpatient Covid-19 admissions.

There’s no question that many of these dollars have helped support vulnerable facilities, particularly in vast, underserved rural areas, and proved necessary federal investments to care for Americans. But the story is far different for many urban hospitals. Numerous well-heeled health systems used earlier Covid subsidies to support strategic acquisitions of vulnerable competitors and physician practices, and are now leveraging those acquisitions to raise prices when Americans can least afford it.

Covid-19 funding deals marked the continuation of a pre-pandemic trend that has seen larger systems swallow up smaller players in pursuit of greater market share, reduced competition, and higher profits. Despite industry claims to the contrary, this kind of consolidation extracts a significant cost from employers, who provide health benefits to more than half of all Americans, and their workers. Hospital mergers increase the average prices of hospital services by 6% to 18%, with no demonstrated improvements in quality or access to care. What’s more, hospital growth crowds out resources for the type of care known to support health and well-being, namely, primary care, behavioral care, and community health.

The pursuit of mergers and acquisitions by the wealthiest health systems, even at the height of the Covid-19 crisis, provides just one more example of a trend that is cutting ever-deeper into Americans’ take-home pay and leading millions into bankruptcy.

U.S. health care today consumes $4.1 trillion a year, or nearly 20% of gross domestic product. The prices hospitals charge have soared 600% since 1990, and hospital services now represent the largest share of total health care costs, at about 37% of the total for privately insured Americans.

Employers, who provide health coverage to roughly half the U.S. population, are acutely aware of where health care’s current cost trajectory is headed. In a recent survey of executives at 300 of the country’s largest employers, nearly 90% said they believe the cost of providing health benefits will become unsustainable within five to 10 years.

Yet instead of finding new ways to manage costs and help sustain this critical lifeline for America’s workers, many health systems continue to increase the prices they charge commercial insurers. And they can because, in many cases, newly consolidated health systems are the only game in town.

Employers and private insurers pay, on average, 224% of what Medicare would have paid for the same service at the same facility, despite new data showing that hospitals require payments that represent just 127% of Medicare to cover their expenses.

Overcharging customers behind a veil of secrecy is nothing new for hospitals, of course. What is new are federal transparency rules that for the first time compel hospitals to post detailed price lists online for 300 of the most common medical procedures. The transparency rules were designed to allow employers and consumers to make informed purchasing decisions, just as they would for any other goods or service.

But more than a year-and-a-half after the rule took effect, the vast majority of hospitals continue to ignore both the spirit and letter of the regulations. When available at all, much of the price information is incomplete, inaccurate or difficult to interpret.

Some observers had hoped the pandemic would be a catalyst for a more equitable and sustainable era in health care. But the opposite is proving true. Despite the enormous contributions and immense sacrifices of frontline clinicians, many of health care’s corporate leaders have exploited the crisis to further consolidate, drive up costs, and collect billions in federal funds with few, if any, strings attached.

The truth is that large urban hospitals and wealthy health systems have more than enough money. Employers, employees and taxpayers must demand that those funds be effectively managed to the benefit of the American public by redirecting existing resources and holding the industry accountable for providing high-quality, equitable, and evidence-based care. Those paying the bills can no longer accept a health care system that exploits workers and employers and endangers the country’s future in pursuit of a fatally flawed status quo.

Elizabeth Mitchell is the president and CEO of Purchaser Business Group on Health, a coalition of nearly 40 of the country’s largest employers. Mike Thompson is the president and CEO of the National Alliance of Healthcare Purchaser Coalitions, a purchaser-led organization dedicated to driving health and health care value across the country. The two organizations are working together to mobilize employer-purchasers, educate policymakers, and advocate for public policies to reduce health care prices.