Critics seek more scrutiny on hospitals in health cost fight

Critics seek more scrutiny on hospitals in health cost fight
© iStock

Sen. Bernie SandersBernie SandersWinners and losers from the South Carolina debate Five takeaways from the Democratic debate Sanders most searched, most tweeted about candidate during Democratic debate MORE (I-Vt.) often bashes “the drug companies and the insurance companies” as he makes the case for “Medicare for All.”

But there’s another major health industry player, also fiercely opposed to Medicare for All, that Sanders usually does not mention: hospitals. 

ADVERTISEMENT

Sanders is not alone. In the Medicare for All fight and in the push to lower health care costs in general, hospitals usually fly under the radar. But they actually make up a significantly larger share of health care spending than drug companies, who are receiving far more attention in Washington amid a bipartisan push to lower drug prices. 

Experts say any major health care cost reform will eventually also have to deal with hospitals. But that’s not easy. Hospitals are politically powerful, given that essentially every lawmaker has one in their district, providing important services and jobs to communities.

That power threatens the push for Medicare for All. And it makes even much smaller action, like a push to protect patients from “surprise” medical bills, difficult as well, health care experts say.   

“If you want to lower health care costs, you can’t ignore hospitals, but right now Congress pretty much is,” said Larry Levitt, a health policy expert at the Kaiser Family Foundation. 

The United States spent $1.1 trillion on hospitals in 2017, 33 percent of total health care spending, according to federal data. That’s compared to $333 billion, or 10 percent, on retail drug spending. 

“There is no way you can lower U.S. health care costs and not do anything about physician and hospital reimbursements, there’s just no way,” said Ben Ippolito, a health economist at the conservative American Enterprise Institute.

The power of hospitals and doctors has made itself clear in the current fight in Congress over legislation to protect patients from getting “surprise” medical bills when they go to the emergency room and one of their doctors happens to be outside their insurance network. Even on an issue that both parties agree needs to be solved, hospital and doctor warnings that the leading solution could cut their payment rates have proved potent. 

That does not bode well for much larger action, like Medicare for All, which would result in substantial cuts to many hospitals’ payments given that Medicare pays hospitals much lower rates than private insurance does. 

“Any policy that would reduce provider payments is, shall we say, not met with open arms on the Hill,” Ippolito said. 

The Trump administration has started to take action on hospital costs, announcing a rule last week to require hospitals to post their prices online, a proposal that hospitals quickly sued over. 

“The Trump administration, to their credit, has been trying to drive at this issue in their transparency rule,” said Shawn Gremminger, senior director of federal relations at the liberal health care advocacy group Families USA.  But he added, “Policymakers should be more focused on it.”

People often have warm feelings toward hospitals that are part of the community and where they have received care for years. Hospitals are also one of the leading sources of jobs in many areas.

 “There’s a hospital in virtually every congressional district and they’re often one of the major employers in that district,” Levitt said. 

Also, having to go to the hospital is also not as common for the average person as picking up drugs from the pharmacy counter, where exposure to price is more visceral and leads to more direct outrage. 

“There’s a lot of at least sort of sympathy for providers that maybe isn’t there for other parts of the health care system,” Ippolito said. “You see your doctor, you want your doctor to be good.”

Hospitals have pushed back hard on any scrutiny, warning that lower payments could lead to damaging cuts and make it even harder for rural hospitals.  

Tom Nickels, executive vice president at the American Hospital Association, argued that hospitals face a high-cost task and have to make up for low payments from government programs like Medicare and Medicaid. 

“Hospitals and health systems take care of every patient who walks through the door, 24 hours a day and regardless of ability to pay,” Nickels said in a statement. “This includes $620 billion in uncompensated care since 2000, due in part to Medicare and Medicaid reimbursing only 87 cents for every dollar spent to treat patients.

“The Congressional Budget Office estimates as many as half of hospitals could have negative margins by 2025. Many struggle to break even today,” he added. “At the same time, large insurance companies raise premiums by double-digits and continue to deny needed care, even in emergencies. Pharmaceutical companies rake in record profits as the cost of prescription drugs rise.”

Still, he said hospitals are “doing their part” to contain costs “despite these headwinds.”

The most drastic step to limit hospital prices is to have the government control them, as under Medicare for All or “rate-setting” laws that have been tried in some states. 

There are also more market-based approaches that seek to crack down on anticompetitive moves that hospitals can make. For example, a bipartisan bill in the Senate Health Committee would ban “all-or-nothing” clauses that hospitals use to force insurers to cover all of the facilities in a healthy system or risk losing access to all of them. 

Experts also pointed to hospitals buying up their rivals to limit competition.

But the biggest change for hospitals would likely be Medicare for All. 

“Hospitals are deathly afraid of the government setting prices,” Levitt said.