Another champion has emerged in the national battle to contain health care expenses. This one is targeting prices charged to consumers, and ultimately to their insurers, by providers in markets with little or no true competition for services.

The National Academy of Social Insurance announced the findings of a panel of experts it convened to examine the dynamics of health care costs in markets with dominant providers.

The panelists represent a wide range of professionals whose interests and work intersects with health care, from those in the insurance, medical and legal fields to consultants and university professors.

The panel examined markets for evidence of providers and insurers taking advantage of their “market power,” a term that describes the clout a given player has in a market.

In its report, Addressing Pricing Power in Health Care Markets: Principles and Policy Options to Strengthen and Shape Markets, the panel found that providers were by far the major cost increase culprits.

“Whether it was looking at claims data or payment rates, there is evidence that dominant hospitals and large physician group practices are able to negotiate prices that are often double or triple what Medicare pays for the same medical services,” the report said. “While the concentration of insurers may be high in most markets, the evidence that it drives prices up is not strong.”

Identifying the responsible parties is just step one — and by far the easiest, the report said.

“Introducing more competition into the marketplace is the best way to address the issue of market power, but ….introducing more competition may not be viable in some markets, which will instead require regulatory intervention,” the panel concluded. “Where market competition is ineffective, public policy can enhance market competition or, if that is not likely to be successful, regulate prices directly.”

Read: Lack of competition drove up PPACA costs

In the national interest of reducing overall health care costs, state and federal regulators will need to take action if the cost of market power in underserved markets is to be effectively addressed, the panel said. And developing effective regulations will be a tricky challenge. The general public’s lack of knowledge about and understanding of the components of the cost of medical care represents a major barrier to putting downward pressure on providers’ charges in these markets, the report said. Often it isn’t consumers who pay the inflated price, but their insurers.

“Greater transparency of the prices of health care services and the quality of care provided is needed to help consumers make better choices about their care,” the panel said. “While payment and delivery system reforms may improve quality, they may also contribute to excessive provider consolidation within markets; before making exceptions for specific delivery and payment reforms, the costs and benefits of the new models should be fully evaluated.”

The report is intended as a starting point for discussions around the added cost of market power, its authors said.

“For too long, unreasonably high and widely varying hospital and physician prices have been the unacknowledged ‘elephant in the room’ in discussions about the ongoing challenge of excessive health care spending. Without more explicit attention to the problem, promising reforms like accountable care organizations could actually exacerbate pricing problems,” said Robert Berenson, M.D., Institute Fellow at the Urban Institute.

The study panel and report were funded by the Robert Wood Johnson Foundation, the California HealthCare Foundation and the Jayne Koskinas Ted Giovanis Foundation for Health and Policy.

Instant Insights /

Report targets pricing practices in underserved health markets

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