ADVERTISEMENT

Hospital Surgical Procedure Markup And Hospital Market Competition

The relationship between interhospital competition and the costs passed on to patients and their families is a complex one. Research has shown that as hospital systems have become more consolidated, prices for routine medical care have increased.

Yet, there are three types of players and thus three types of relationships to contend with – those between hospitals and patients, between patients and insurers, and between hospitals and insurers.  Hospitals with greater market share – as well as hospitals in more concentrated markets with less competition – may be able to negotiate higher payments from private third-party payers. On the other hand, hospitals that are subject to more competition may be less able to negotiate higher payments or charge higher prices.

ADVERTISEMENT

This question sits at the crux of the debate regarding implicit price controls. As we discuss, proponents for hospital market consolidation (which effectively reduces hospital market competition), tout the gains in efficiency and quality of patient care – if primary care doctors are in the same system as surgeons, then referrals and care planning ought to be smoother. On the other hand, while this increase in overall efficiency may lead to overall lower costs, hospitals may nevertheless apply a substantial markup.

The aim of our study was to characterize how hospital markup for surgical procedures is related to hospital market competition. Indeed, the factors that affect procedural markup across different types of hospitals (e.g. not-for-profit versus private-for-profit hospitals, teaching versus non-teaching hospitals, and hospitals that care for a disproportionate share of publicly-insured patients) have not been well defined.

Methods

Using data from the Nationwide Inpatient Sample, we estimated the average markup (i.e. percent difference between the total hospital charges and average estimated costs) across a range of gastrointestinal or cardiothoracic operations. Our models were adjusted for patient and hospital factors. Then, we compared the average markup between not-for-profit and private, for-profit hospitals, across a range of hospital markets (i.e. from very competitive [unconcentrated] to noncompetitive [highly concentrated]).

Findings

Hospital markup is not uniformly sensitive to hospital market concentration, though clinical practices may be sensitive to interhospital competition. As we report in the conclusions of our paper, overall, private for-profit hospitals employed a 72% greater adjusted markup compared with not-for-profit hospitals, though the association between market concentration and markup was different between the two groups.

ADVERTISEMENT

In highly concentrated markets, private for-profit hospitals employed an 81% higher adjusted markup versus not-for-profit hospitals, while in unconcentrated markets, private for-profit status was associated with a 62% higher markup.

These findings suggest that costs for surgical care in private, for-profit hospitals may be less constrained in more concentrated (i.e. less competitive) markets.

Conversely, lower markups employed by not-for-profit hospitals in more concentrated markets may indicate that the cost of surgical care was not solely associated with market pressures.

These findings are described in the article entitled Variation in markup of general surgical procedures by hospital market concentration, recently published in the American Journal of Surgery This work was conducted by Marcelo Cerullo from Johns Hopkins University School of Medicine and Duke University Medical Center, Sophia Y. Chen and Joseph K. Canner from Johns Hopkins University School of Medicine, and Mary Dillhoff, Carl R. Schmidt, and Timothy M. Pawlik from Wexner Medical Center at Ohio State University.

ADVERTISEMENT

Comments

READ THIS NEXT

The Effects Of Micro- And Nanoplastics Are Not Yet Fully Understood

Standard methodologies for their sampling, analysis, and regulation remain insufficient Owing to their versatility, plastics have almost limitless applications. Most […]

Assessing Aged Care Workers’ Understanding Of Person-Centered Care

With the aged care sector under the spotlight and currently undergoing a Royal Commission in Australia, it is a timely reminder […]

Fluoxetine, A Drug Used For Depression, May Adversely Affect Bones, While Another Drug, Escitalopram, Appears To Be Safer

Clinical studies provide evidence that treatment with drugs for depression increases the risk of fracture in humans. Some of these […]

India And Bhutan As A Model For Inter- And Intra-Regional Energy Trade

Collaboration among the countries in South Asia for inter- and intra-regional energy trade has been identified as the most cost-effective […]

Analyzing How Tea And Mint Infusion Effects Element Content In Beverages

Popular medicinal plants and their infusions have been the subject of significant scientific interest due to their therapeutic value for […]

Phenotypic Plasticity Of Morphoanatomical Features Facilitate The Invasion Of Alligator Weed

Alligator weed (Alternanthera philoxeroides, Amaranthaceae) is one of the more famous invasion plants in the world, colonizing in aquatic and […]

Algal Process Affords Sustainable Wastewater Treatment And Disinfection

Publicly owned treatment works (POTWs) are required to reduce the pollutants in urban wastewaters to statutory levels prior to discharging […]

Science Trends is a popular source of science news and education around the world. We cover everything from solar power cell technology to climate change to cancer research. We help hundreds of thousands of people every month learn about the world we live in and the latest scientific breakthroughs. Want to know more?