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Sirur AJN, Pillai K R. Pricing of hospital services: evidence from a thematic review. HEALTH ECONOMICS, POLICY, AND LAW 2024; 19:234-252. [PMID: 38314528 DOI: 10.1017/s1744133123000397] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 02/06/2024]
Abstract
The management implications of pricing healthcare services, especially hospitals, have received insufficient scholarly attention. Additionally, disciplinary overlaps have led to scattered academic efforts in this domain. This study performs a thematic synthesis of the literature and applies retrospective analysis to hospital service pricing articles to address these issues. The study's inputs were sourced from well-known online repositories, using a structured search string and PRISMA flow chart to select the pertinent documents. Our thematic analysis of pricing literature encompasses: (a) comprehension of hospital service pricing nature; (b) pricing objectives, strategies and practices differentiation; (c) presentation of factors impacting hospital service pricing. We observe that hospital pricing is an intricate and unclear matter. The terms 'pricing strategies' and 'pricing practices' are often used interchangeably in academic literature. Hospital service pricing is influenced by costs, demand and supply factors, market structure, pricing regulation and third-party reimbursements. The study's findings provide policy implications for service pricing in hospitals, in addition to suggesting avenues for future research on hospital pricing.
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Affiliation(s)
- Andria J N Sirur
- Department of Commerce, Manipal Academy of Higher Education, Manipal, Karnataka, India
| | - Rajasekharan Pillai K
- Manipal Institute of Management, Manipal Academy of Higher Education, Manipal, Karnataka, India
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Capital Expenditures Increased at Rural Hospitals That Merged Between 2012 and 2015. J Healthc Manag 2021; 65:346-364. [PMID: 32925534 DOI: 10.1097/jhm-d-19-00219] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.7] [Reference Citation Analysis] [Abstract] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/26/2022]
Abstract
EXECUTIVE SUMMARY The number of rural hospital mergers has increased substantially in recent years. A commonly reported reason for merging is to increase access to capital. However, no empirical evidence exists to show whether capital expenditures increased at rural hospitals after a merger. We used a difference-in-differences approach to determine whether total capital expenditures changed at rural hospitals after a merger. The comparison group (rural hospitals that did not merge during the 2012 through 2015 study period) was weighted using inverse probability of treatment weights. The key outcome measure was logged total capital expenditures.Merging resulted in a 26% increase in capital expenditures and also was associated with a significant improvement in plant age. The postmerger improvement in plant age may have been partially attributable to merger-related accounting changes and partially attributable to increased capital expenses, possibly on long-term asset renovations and replacement.These findings suggest that through mergers, rural hospital board members and executives who have accepted or are considering a merger may improve a hospital's ability to increase capital expenditures. Further, increased capital investments in rural hospitals may be an important signal to the community that the acquirer intends to keep the rural hospital open and continue providing some volume and level of services within the community. Future research should determine how capital is spent after a merger.
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Williams D, Holmes GM, Song PH, Reiter KL, Pink GH. For Rural Hospitals That Merged, Inpatient Charges Decreased and Outpatient Charges Increased: A Pre‐/Post‐Comparison of Rural Hospitals That Merged and Rural Hospitals That Did Not Merge Between 2005 and 2015. J Rural Health 2020; 37:308-317. [DOI: 10.1111/jrh.12461] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 12/18/2022]
Affiliation(s)
- Dunc Williams
- Department of Healthcare Leadership and Management, College of Health Professions Medical University of South Carolina South Carolina
| | - G. Mark Holmes
- Department of Health Policy and Management, Gillings School of Global Public Health and the Cecil G. Sheps Center for Health Services Research University of North Carolina at Chapel Hill Chapel Hill North Carolina
| | - Paula H. Song
- Department of Health Policy and Management, Gillings School of Global Public Health and the Cecil G. Sheps Center for Health Services Research University of North Carolina at Chapel Hill Chapel Hill North Carolina
| | - Kristin L. Reiter
- Department of Health Policy and Management, Gillings School of Global Public Health and the Cecil G. Sheps Center for Health Services Research University of North Carolina at Chapel Hill Chapel Hill North Carolina
| | - George H. Pink
- Department of Health Policy and Management, Gillings School of Global Public Health and the Cecil G. Sheps Center for Health Services Research University of North Carolina at Chapel Hill Chapel Hill North Carolina
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Williams D, Reiter KL, Pink GH, Holmes GM, Song PH. Rural Hospital Mergers Increased Between 2005 and 2016-What Did Those Hospitals Look Like? INQUIRY : A JOURNAL OF MEDICAL CARE ORGANIZATION, PROVISION AND FINANCING 2020; 57:46958020935666. [PMID: 32684072 PMCID: PMC7370548 DOI: 10.1177/0046958020935666] [Citation(s) in RCA: 8] [Impact Index Per Article: 2.0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Download PDF] [Figures] [Subscribe] [Scholar Register] [Received: 01/10/2020] [Revised: 05/08/2020] [Accepted: 05/28/2020] [Indexed: 11/15/2022]
Abstract
The objective of this study is to determine whether key hospital-level financial and market characteristics are associated with whether rural hospitals merge. Hospital merger status was derived from proprietary Irving Levin Associates data for 2005 through 2016 and hospital-level characteristics from HCRIS, CMS Impact File Hospital Inpatient Prospective Payment System, Hospital MSA file, AHRF, and U.S. Census data for 2004 through 2016. A discrete-time hazard analysis using generalized estimating equations was used to determine whether factors were associated with merging between 2005 and 2016. Factors included measures of profitability, operational efficiency, capital structure, utilization, and market competitiveness. Between 2005 and 2016, 11% (n = 326) of rural hospitals were involved in at least one merger. Rural hospital mergers have increased in recent years, with more than two-thirds (n = 261) occurring after 2011. The types of rural hospitals that merged during the sample period differed from nonmerged rural hospitals. Rural hospitals with higher odds of merging were less profitable, for-profit, larger, and were less likely to be able to cover current debt. Additional factors associated with higher odds of merging were reporting older plant age, not providing obstetrics, being closer to the nearest large hospital, and not being in the West region. By quantifying the hazard of characteristics associated with whether rural hospitals merged between 2005 and 2016, these findings suggest it is possible to determine leading indicators of rural mergers. This work may serve as a foundation for future research to determine the impact of mergers on rural hospitals.
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Affiliation(s)
- Dunc Williams
- Medical University of South Carolina, Charleston, USA
| | | | | | | | - Paula H. Song
- The University of North Carolina at Chapel Hill, USA
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Cooper Z, Craig SV, Gaynor M, Van Reenen J. THE PRICE AIN'T RIGHT? HOSPITAL PRICES AND HEALTH SPENDING ON THE PRIVATELY INSURED. THE QUARTERLY JOURNAL OF ECONOMICS 2019; 134:51-107. [PMID: 32981974 PMCID: PMC7517591 DOI: 10.1093/qje/qjy020] [Citation(s) in RCA: 159] [Impact Index Per Article: 31.8] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/19/2023]
Abstract
We use insurance claims data covering 28% of individuals with employer-sponsored health insurance in the United States to study the variation in health spending on the privately insured, examine the structure of insurer-hospital contracts, and analyze the variation in hospital prices across the nation. Health spending per privately insured beneficiary differs by a factor of three across geographic areas and has a very low correlation with Medicare spending. For the privately insured, half of the spending variation is driven by price variation across regions, and half is driven by quantity variation. Prices vary substantially across regions, across hospitals within regions, and even within hospitals. For example, even for a nearly homogeneous service such as lower-limb magnetic resonance imaging, about a fifth of the total case-level price variation occurs within a hospital in the cross section. Hospital market structure is strongly associated with price levels and contract structure. Prices at monopoly hospitals are 12% higher than those in markets with four or more rivals. Monopoly hospitals also have contracts that load more risk on insurers (e.g., they have more cases with prices set as a share of their charges). In concentrated insurer markets the opposite occurs-hospitals have lower prices and bear more financial risk. Examining the 366 mergers and acquisitions that occurred between 2007 and 2011, we find that prices increased by over 6% when the merging hospitals were geographically close (e.g., 5 miles or less apart), but not when the hospitals were geographically distant (e.g., over 25 miles apart).
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Affiliation(s)
| | | | - Martin Gaynor
- Carnegie Mellon University and National Bureau of Economic Research
| | - John Van Reenen
- Massachusetts Institute of Technology, Centre for Economic Performance, and National Bureau of Economic Research
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Lindrooth RC. Research on the Hospital Market: Recent Advances and Continuing Data Needs. INQUIRY: The Journal of Health Care Organization, Provision, and Financing 2016; 45:19-29. [DOI: 10.5034/inquiryjrnl_45.01.19] [Citation(s) in RCA: 7] [Impact Index Per Article: 0.9] [Reference Citation Analysis] [Abstract] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 11/06/2022]
Abstract
Research focused on the hospital market has been instrumental in furthering our understanding of the role of competition in health care. Such research would not have been conducted without the extensive public use data that have been made available to researchers. In particular, path-breaking studies were made possible thanks to access to Medicare and state all-payer discharge data. This paper describes recent advances in our understanding of hospital competition and speculates about what we could learn if additional data were available.
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Bazzoli GJ, Dynan L, Burns LR, Yap C. Two Decades of Organizational Change in Health Care: What Have we Learned? Med Care Res Rev 2016; 61:247-331. [PMID: 15358969 DOI: 10.1177/1077558704266818] [Citation(s) in RCA: 89] [Impact Index Per Article: 11.1] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/16/2022]
Abstract
The 1980s and 1990s witnessed a substantial wave of organizational restructuring among hospitals and physicians, as health providers rethought their organizational roles given perceived market imperatives. Mergers, acquisitions, internal restructuring, and new interorganizational relationships occurred at a record pace. Matching this was a large wave of study and discourse among health services researchers, industry experts, and consultants to understand the causes and consequences of organizational change. In many cases, this literature provides mixed signals about what was accomplished through these organizational efforts. The purpose of this review is to synthesize this diverse literature. This review examines studies of horizontal consolidation and integration of hospitals, horizontal consolidation and integration of physician organizations, and integration and relationship development between physicians and hospitals. In all, around 100 studies were examined to assess what was learned through two decades of research on organizational change in health care.
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Nikolentzos A, Kontodimopoulos N, Polyzos N, Thireos E, Tountas Y. Reengineering NHS Hospitals in Greece: Redistribution Leads to Rational Mergers. Glob J Health Sci 2015; 7:272-87. [PMID: 26156925 PMCID: PMC4803861 DOI: 10.5539/gjhs.v7n5p272] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Track Full Text] [Download PDF] [Figures] [Journal Information] [Subscribe] [Scholar Register] [Received: 12/11/2014] [Accepted: 12/24/2014] [Indexed: 11/24/2022] Open
Abstract
The purpose of this study was to record and evaluate existing public hospital infrastructure of the National Health System (NHS), in terms of clinics and laboratories, as well as the healthcare workforce in each of these units and in every health region in Greece, in an attempt to optimize the allocation of these resources. An extensive analysis of raw data according to supply and performance indicators was performed to serve as a solid and objective scientific baseline for the proposed reengineering of the Greek public hospitals. Suggestions for “reshuffling” clinics and diagnostic laboratories, and their personnel, were made by using a best versus worst outcome indicator approach at a regional and national level. This study is expected to contribute to the academic debate about the gap between theory and evidence based decision-making in health policy.
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Affiliation(s)
- Athanasios Nikolentzos
- School of Social Science, Hellenic Open University & Institute for Social and Preventative Medicine.
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Kleiner SA, White WD, Lyons S. Market power and provider consolidation in physician markets. INTERNATIONAL JOURNAL OF HEALTH ECONOMICS AND MANAGEMENT 2015; 15:99-126. [PMID: 27878669 DOI: 10.1007/s10754-014-9160-y] [Citation(s) in RCA: 9] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 07/18/2014] [Accepted: 12/11/2014] [Indexed: 06/06/2023]
Abstract
Physician services comprise a substantial share of total health care spending, and the price of health care services has been cited as a key contributor to the disproportionately high rate of health care spending in the US. However, despite a large literature analyzing market power in the hospital and insurance industries, less is known about the extent to which physicians exercise market power. In this study we make use of a private health insurance claims data set to analyze physician market power for two specialties within three mid-sized US metropolitan areas. Using a method developed for hospital competition analysis, we estimate measures of consumer willingness-to-pay for physician practices within each of these markets and relate these to the prices paid to these practices for a set of physician services. Our results are suggestive of the presence of market power in the markets that we analyze. We simulate physician practice mergers for the two largest practices in each market for each specialty analyzed. Results suggest that practice mergers could result in price increases deemed significant by antitrust authorities in some markets but not in others.
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Affiliation(s)
- Samuel A Kleiner
- Cornell University, NBER, 108 Martha Van Rensselaer Hall, Ithaca, NY, 14853, USA.
| | - William D White
- Cornell University, 3301A Martha Van Rensselaer Hall, Ithaca, NY, 14853, USA
| | - Sean Lyons
- Congressional Budget Office, Ford House Office Building, 4th Flr. Second and D Streets, SW, Washington, DC, 20515-6925, USA
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Gaynor M, Laudicella M, Propper C. Can governments do it better? Merger mania and hospital outcomes in the English NHS. JOURNAL OF HEALTH ECONOMICS 2012; 31:528-543. [PMID: 22634021 DOI: 10.1016/j.jhealeco.2012.03.006] [Citation(s) in RCA: 53] [Impact Index Per Article: 4.4] [Reference Citation Analysis] [Abstract] [MESH Headings] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Received: 11/15/2011] [Revised: 03/21/2012] [Accepted: 03/31/2012] [Indexed: 06/01/2023]
Abstract
The literature on mergers between private hospitals suggests that such mergers often produce little benefit. Despite this, the UK government has pursued an active policy of hospital mergers, arguing that such consolidations will bring improvements for patients. We examine whether this promise is met. We exploit the fact that between 1997 and 2006 in England around half the short term general hospitals were involved in a merger, but that politics means that selection for a merger may be random with respect to future performance. We examine the impact of mergers on a large set of outcomes including financial performance, productivity, waiting times and clinical quality and find little evidence that mergers achieved gains other than a reduction in activity. Given that mergers reduce the scope for competition between hospitals the findings suggest that further merger activity may not be the appropriate way of dealing with poorly performing hospitals.
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Competition in Health Care Markets11We wish to thank participants at the Handbook of Health Economics meeting in Lisbon, Portugal, Pedro Pita Barros, Rein Halbersman, and Cory Capps for helpful comments and suggestions. Misja Mikkers, Rein Halbersma, and Ramsis Croes of the Netherlands Healthcare Authority graciously provided data on hospital and insurance market structure in the Netherlands. David Emmons kindly provided aggregates of the American Medical Association's calculations of health insurance market structure. Leemore Dafny was kind enough to share her measures of market concentration for the large employer segment of the US health insurance market. All opinions expressed here and any errors are the sole responsibility of the authors. No endorsement or approval by any other individuals or institutions is implied or should be inferred. HANDBOOK OF HEALTH ECONOMICS 2011. [DOI: 10.1016/b978-0-444-53592-4.00009-8] [Citation(s) in RCA: 31] [Impact Index Per Article: 2.4] [Reference Citation Analysis] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 12/03/2022]
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Melnick G, Keeler E. The effects of multi-hospital systems on hospital prices. JOURNAL OF HEALTH ECONOMICS 2007; 26:400-13. [PMID: 17084928 DOI: 10.1016/j.jhealeco.2006.10.002] [Citation(s) in RCA: 33] [Impact Index Per Article: 1.9] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 09/26/2005] [Revised: 09/05/2006] [Accepted: 10/04/2006] [Indexed: 05/12/2023]
Abstract
US hospital prices are rising again after years of limited growth. We analyze trends in hospital prices during a period of significant price growth (1999-2003) to assess whether hospitals that are part of multi-hospital systems were able to increase their prices faster than non-system hospitals. We find hospitals that were members of multi-hospital systems were able to increase their prices substantially more than comparable non-systems hospitals (34% for large systems and 17% for small systems). Further, we find that the systems effect is not confined to hospitals that have other system member hospitals in their local markets. One possible explanation is that hospitals belonging to non-local multi-hospital systems have improved their bargaining position vis-à-vis health plans.
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Abstract
This quantitative research study assesses the organizational characteristics, market factors, and performance of not-for-profit hospitals in the United States. These results have managerial implications related to hospital efficiency, organizational performance, and the role of not-for-profit hospitals within local communities. The study has policy implications on access to clinical services within local communities, the availability of charity care, and the long-term viability of the not-for-profit health care industry due to potential bankruptcy and closure. This study clearly demonstrates that not-for-profit hospital managers are faced with declining profitability and are challenged to reduce hospital-operating expenses while meeting their charitable mission. Additionally, the greater size and increased clinical complexity of not-for-profit hospitals are increasing organizational overhead. In many cases, the increased clinical complexity is a commitment to the organizational mission of providing a full range of services to the community. From a policy perspective, the study suggests that not-for-profit hospitals have aging facilities and reduced cash flow due to lower profit margins. As a result, many not-for-profit hospitals face potential bankruptcy and closure. This study clearly documents a threat to the provision of charity care in local communities and the long-term viability of the not-for-profit health care industry in the United States.
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Affiliation(s)
- Jeffrey P Harrison
- Health Administration Program, College of Health, University of North Florida, 4567 St. Johns Bluff Road South, Jacksonville, FL 32224, USA.
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Cuellar AE, Gertler PJ. Trends in hospital consolidation: the formation of local systems. Health Aff (Millwood) 2004; 22:77-87. [PMID: 14649434 DOI: 10.1377/hlthaff.22.6.77] [Citation(s) in RCA: 94] [Impact Index Per Article: 4.7] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/05/2022]
Abstract
During the past decade the hospital industry has made profound organizational changes, including the extensive consolidation of hospitals through merger and the formation of hospital systems. Although the rate of hospital system acquisitions may be slowing, the local presence of hospital systems is growing. Locally concentrated systems have been formed by both for-profit and nonprofit hospitals. Researchers have tended to ignore acquisitions or have portrayed system formation as primarily an issue of hospital ownership conversion, thereby focusing on the expansion of national, for-profit systems. This has left a large gap in policymakers' understanding of how locally concentrated systems may affect patient care and competition.
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Affiliation(s)
- Alison Evans Cuellar
- Department of Health Policy and Management, Mailman School of Public Health, Columbia University, New York City, USA
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Burns LR, Pauly MV. Integrated delivery networks: a detour on the road to integrated health care? Health Aff (Millwood) 2002; 21:128-43. [PMID: 12117123 DOI: 10.1377/hlthaff.21.4.128] [Citation(s) in RCA: 155] [Impact Index Per Article: 7.0] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/05/2022]
Abstract
This paper reviews the rationales and evidence for horizontal and vertical integration involving hospitals. We find a disjunction between the integration rationales espoused by providers and those cited in the academic literature. We also generally find that integration fails to improve hospitals' economic performance. We offer seven lessons from hospitals' efforts to integrate and then suggest four alternative models for achieving integrated delivery of health care services.
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Affiliation(s)
- Lawton R Burns
- Wharton School, University of Pennsylvania, Philadelphia, USA
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