Module 3: Hospital Pricing and Competition
The narrow goal of this module is to understand hospital pricing, how we measure competition (in general, but also some specific aspects of health care markets), and how competition affects hospital/insurer negotiations.
The big picture economics concept of this module, or the “airport” idea that I hope you can remember several years later when we run into each other at the airport, is “profit matters, even for non-profits.” What does that mean? In the context of hospitals (the majority of which are designated as not-for-profit entities), it means that hospitals still have to make some money. As one CEO put it regularly in my past life, “there’s no mission without margin.”
Readings
- Readings for this module:
- Section 5.4 of Frank A Sloan and Chee-Ruey Hsieh, Health Economics, MIT Press Books, vol. 1 (The MIT Press, 2012).
- Uwe E Reinhardt, “The Pricing of US Hospital Services: Chaos Behind a Veil of Secrecy,” Health Affairs 25, no. 1 (2006): 57–69.
- M Gaynor, K Ho, and R Town, “The Industrial Organization of Health Care Markets,” Journal of Economic Literature 47, no. 2 (2015): 235–284.
- M Gaynor, F Mostashari, and P Ginsburg, Making Health Care Markets Work: Competition Policy for Health Care, Policy Report (Brookings Institute, 2017).
- Zack Cooper et al., “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” The Quarterly Journal of Economics 134, no. 1 (2019): 51–107. We’ll discuss this paper at the end of the module.
- Supplemental information we’ll use throughout this module.
- “History of Cost Shifting”
- Reinhardt, Uwe. 2006. “The Pricing of US Hospital Services: Chaos Behind a Veil of Secrecy.” Health Affairs, 25(1):57-69.
- “Value of tax breaks for non-profit hospitals doubled in a decade,” Washington Post, 2015
- “Nonprofit hospitals’ community benefit requirements,” Health Affairs policy brief, 2016
- Health Care Pricing Project
- Health Care Cost Institute, Healthy Marketplace Index
- “Making healthcare markets work: Competition policy for health care”
- Hearing on health care consolidation and anticompetitive conduct. Please focus just on the testimony of Martin Gaynor, as this is most relevant for our class. But if you’re interested in pharmaceuticals, there is some great content in this video from other members of the panel as well.
- Hospital Billing. This is a 6 minute video explaining some of the confusing aspects of hospital billing, which plays into what it really means to be a not-for-profit versus for-profit hospital.
Slides
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Fun fact: If you type ? (or shift + /) while going through the slides, you can see a list of special slide-specific commands.