Unchecked Hospital Pricing Power Is Breaking the Healthcare System
For millions of Americans, healthcare is getting harder to afford. It’s not just people without insurance: even families with coverage are feeling the squeeze from rising premiums, deductibles which have more than doubled over the past decade, and medical bills that come out of nowhere.
Yet despite endless debate about healthcare spending, one of the biggest drivers of these rising costs continues to escape serious scrutiny: hospital pricing power.
Hospitals have enormous influence in today’s healthcare system, and too often that power is used to raise prices on patients and families. Since 2000, hospital prices have more than doubled, growing at roughly twice the rate of overall inflation and significantly faster than worker earnings. Those increases don’t stay confined to hospital bills. They ripple throughout the healthcare system, driving up insurance premiums, deductibles, and out-of-pocket costs.
Unlike most markets, hospital prices aren’t set through transparent competition. Instead, they’re determined in closed-door negotiations between hospitals and insurers. According to the RAND Corporation’s nationwide hospital price transparency studies, private insurers pay hospitals more than 220% of Medicare rates on average, and in some markets that figure exceeds 300%.
Large hospital systems know insurers can’t realistically leave them out of networks without upsetting patients. That leverage gives them the upper hand. And as hospital systems continue to merge, acquire competitors, and buy up physician practices, their bargaining power only grows. Plus, as highlighted by my organization, the Bull Moose Project, private equity has compounded the problem by purchasing hospitals and practices around the country.
The result, in many communities, is the creation of a monopoly – and it results in patients not having meaningful choices. When a single system controls most of the hospital beds, doctors, and specialty care in an area, insurers have little choice but to accept higher prices.
Patients are often told to shop around for care, as if healthcare worked like booking a flight. But real price information (as opposed to the distorted “market” prices Americans are exposed to) is hard to find, and in many cases, real alternatives simply don’t exist. Some have suggested transparency laws to fix the problem. But while these would be helpful in waking more Americans up to the rigged game they’re being forced to play, transparency alone can’t fix a market where hospitals hold all the leverage.
And the impact of rising hospital prices goes far beyond the patients who end up admitted. Employers pay more to offer health coverage. Workers see slower wage growth as healthcare costs eat into compensation. Taxpayers shoulder higher costs through Medicare, Medicaid, and other public programs forced to operate in a market distorted by unchecked hospital pricing power. The effect ripples throughout our entire economy, making us all worse off.
If Congress is serious about lowering healthcare costs, it must address the real drivers of spending: hospital prices and market power. That means strengthening oversight of hospital mergers and consolidation, enforcing antitrust laws to prevent excessive market concentration, holding hospitals accountable when they charge prices far above the cost of care, and reexamining payment policies that reward volume and expansion over value.
Reform should protect access to care while ensuring hospitals compete on quality and efficiency, not leverage. Community hospitals that truly serve patients shouldn’t be undercut by massive systems using market dominance to extract higher prices from families and employers.
Congress has a choice. It can continue tinkering around the edges of healthcare costs, or it can confront the reality that hospital pricing power is a central problem. If lawmakers want healthcare to be more affordable, they need to start with how hospital prices are set — and why consumers are the ones left paying the bill.
Healthcare should put patients first, not protect a system where rising hospital prices go unquestioned. It’s time to tackle the real driver of healthcare costs and deliver meaningful relief for American families.
