Hospital pricing survey finds networks more costly than independent hospitals

A recent University of Michigan study based on Centers for Medicare & Medicaid Services data finds surgical procedures cost more inside of U.S. hospital networks than at comparable independent hospitals.

A recent study run by CMS compared pricing of independent and network hospitals pound for pound on a series of surgical procedures, raising the question, “Why does it cost more to be in the network?”

A bit of background: In 2021, the Hospital Price Transparency Rule went into effect. The policy looked to improve the transparency of pricing and, overall, make health care services easier to shop. This policy demands that hospitals that receive funding on a federal level must release their prices for a handful of health care services, including 16 surgical procedures. Federal regulators, those who evaluate the tradeoff between hospital mergers and consolidations, have shown increased attention to the difference in these prices and the information has slowly become available.

Roughly 3,200 hospitals reported their prices in the study and were included in this analysis. For 15 of the 16 procedures, the median negotiated price was significantly higher at facilities within networks compared with independent hospitals.

Many surgical procedures proved to be pricier for hospitals in the network. A shoulder arthroscopy, for example, was 1.7 times more costly at network-linked facilities compared with independent hospitals, comparing a value of $4,432 to $2,643. For each procedure, there was significant variation in negotiated prices. The median price for prostatectomy at facilities in hospital networks was $9,567, while independent facilities offered a median price of $8,601.

What did the study determine? Primarily, these 16 surgical procedures within network facilities ended up featuring higher negotiated prices. Second, the study found wide variability across facilities within and outside hospital networks.

“Both of these conclusions build on prior work that identified commercially negotiated price variation for other health care services, and extend these findings further by accounting for hospital network participation for surgical procedures,” the report says.

“As more hospitals become compliant with this policy, it will be important to better understand the mechanisms behind these significant variations in negotiated prices for surgical care to identify areas of unwarranted variation that may be mitigated.”

What impacts these prices to create such wide gaps? That’s work that lies ahead for the number crunchers.

Related: Consolidated health systems offer slightly better care, but significantly higher costs, study finds

“Whether negotiated rates differ across independent versus network hospitals remains unknown. On one hand, facilities within hospital networks may have greater market share, allowing them to negotiate higher rates with payers. On the other hand, being a hospital within a network allows for economies of scale, where large networks are able to provide services at lower prices,” the report says.