NCPA - National Center for Policy Analysis

Hospitals: The Big Box Health Care Store You Should Avoid

September 1, 2015

With 97% of hospital bills being paid by third-parties, hospitals are not forced to offer competitive prices to patients. Unlike Big Bix stores like Sam's Club, Target and Home Depot, hospitals are not using their large economies of scale to bring down healthcare costs. Instead, more and more hospitals are buying physician practices, which comes with a host of hidden issues, writes senior fellow Devon Herrick of the National Center for Policy Analysis.

While the office, paperwork, and even staff may be the same, the services performed in hospital-owned clinics come with "facility fees," aimed directly at increasing the bill. Since Congressional policymakers are tolerating the monopolistic behaviors and price gauging, independent providers are stepping in to offer competitive prices on standard procedures:

  • Freestanding imaging centers and labs offer procedures, such as CT scans, MRIs, and X-Rays, for as low as 10% of the cost of having the procedure done at a hospital, much of which is reimbursable by Medicare.
  • Ambulatory surgery centers (ASCs) provide outpatient services at lower rates than identical procedures within hospitals.
  • Micro hospitals are becoming increasingly popular, providing overnight stays for more complicated procedures which require post-operation monitoring.
  • Private walk-in clinics are even becoming equipped to handle more urgent cases.

So why does everything cost more in a big box hospital? It's not because hospitals have high overhead (Home Depot has high overhead). It's the perverse effects third-party payments have on competition. Ninety-seven percent of hospital bills are paid for by third-parties, so hospitals don't have to compete with each other for patients on the basis of price. Another reason everything costs more in a hospital is because Congress tolerates it. In a world where third-party payment was less pervasive (or perhaps better designed), Hospital Depot would be the one-stop-shop for health care services at the competitive prices.

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Source: Devon Herrick, Ph.D., "Hospitals: The Big Box Health Care Store You Should Avoid," Townhall, August 31, 2015.


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