Higher Hospital Prices Don’t Always Mean Better Health Outcomes
A new study from researchers at the National Bureau of Economic Research (NBER) has found that receiving care from higher-priced hospitals doesn’t necessarily lead to better health outcomes.
The researchers found receiving care at a higher-priced hospital only led to better health outcomes at hospitals located in less concentrated markets.
Being admitted to a higher-priced hospital led to patient spending increasing by 52% and mortality falling by 35%, but only in markets with less competition.
NBER found hospital prices and mortality is largely driven by a price-quality relationship only present in hospitals located in relatively unconcentrated markets.
The researchers estimate that patients in less concentrated markets are 1.37 percentage points (47%) less likely to die overall.
NBER’s estimates also suggest that high-priced hospitals save an additional life at a cost of approximately $1 million.
Overall, the authors say high prices more likely reflect patients' lack of choices in getting care, not the quality of the hospital.
Why it matters:
This study illustrates the link between hospital prices, market concentration, and quality, and recommends policymakers take different approaches to price regulation based on market competition.
In highly concentrated markets, the authors say policymakers should consider regulating providers’ prices when competition is geographically infeasible, which applies to roughly 69% of the hospitals in the U.S.
In less concentrated markets, the authors say policymakers should move with caution in regulating prices as it may lead to a reduction in quality.