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This Week in Health Care Reform: March 15th, 2019

New data on health care prices is released; drug spending in the U.S. is the highest in the world; freestanding ERs charge a hefty markup; and, hospitals, not physicians, are shown to drive up health care costs.

Week in Review

Health Care Price Data: According to a new interactive report from the Health Care Cost Institute (HCCI), average health care prices have gone up, despite utilization going down.  Allowing for regional variations between cities and towns, from 2012 to 2016, prices increased 13 percent, while over that same period, usage dropped by 17 percent.  As for those regional variations, HCCI’s analysis found that metropolitan areas with high use tended to have lower prices – although, that trend wasn’t consistent across the country.  The report comes as stakeholders continue to grapple with bending the health care cost curve without limiting access or negatively impacting quality of care.  Worth noting, the analysis also found noticeable variations within localities across different service categories, highlighting the importance of better understanding the local conditions that explain health care costs.

U.S. Drug Prices: Lawmakers and stakeholders, working to find a path forward to address out-of-control drug prices, got a reminder late last week of just how pressing the issue is becoming.  According to the latest analysis, with drug prices accounting for 10 percent of our skyrocketing overall health care spending, the U.S. continues to have the highest prescription drug spending in the world.  In fact, per capital prescription drug expenses in this country in 2016 were more than $1,000, compared to the average of $593, and well above the next closest country, Switzerland, at $794.  Tellingly, however, the U.S. was closer to the pack in regards to out-of-pocket expenses, which, analysts explain, had to do with consumers in this country having insurance coverage.  But, it’s worth pointing out, that prescription drug costs make up the largest percentage of health insurance premiums at 23.3 percent, followed closely by physician services at 22.2 percent.

Freestanding ERs: As has been covered, emergency rooms (ERs) have not-so-quietly established themselves as being prodigious drivers of rising health care costs.  However, new evidence suggests that a growing breed of ERs have distinguished themselves even further, charging exponentially more than what a regular visit to a doctor’s office would ordinarily cost.  These facilities, referred to as freestanding emergency departments, provide emergency medical care, but are physically separate from hospitals.  What also sets them apart from more traditional ERs is that they often don’t provide treatment for common emergencies, such as traumas, strokes, or heart attacks.  In fact, according to one recent analysis, only 2.3 percent of visits to freestanding ERs are for actual emergency care.  Alarmingly, experts point out that in some areas, a change in location of where the care was ultimately received to a less costly alternative – for instance, a doctor’s office or even an urgent care center – would result in savings of more than $3,000 per visit.  Put another way, in Texas, the average cost of treating common conditions at a freestanding ER is 19 times more than it would be at an urgent care center, and 22 times more than treatment at a doctor’s office.  With that in mind, it’s hardly a shock to find out that the number of these facilities ballooned from 222 in 2008 to 566 in 2016

Hospitals Driving Costs:
Last month, a new study was published in Health Affairs showing that the growth in hospital prices was more responsible for driving up health care costs for the privately insured than the rise in physician prices.  From 2007 to 2014, hospital prices grew 42 percent, compared to physician prices, which increased by 18 percent.  Similarly, hospital-based outpatient care went up 25 percent, while physician-based care grew just 6 percent.  Researchers went on to suggest that any efforts to reduce health care spending should be primarily focused on addressing hospital price growth, including an increased focus on antitrust enforcement and incentivizing value-based care.      

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