Recent study findings suggest that Medicare payment cuts under the Affordable Care Act are forcing hospitals to either raise their prices to private insurers or reduce costs, depending on what kind of market they are in, according to research published in Health Affairs.
For their study, researchers studied 2008 data on hospital margins for more than 30,000 Medicare and privately insured patients undergoing one of seven major procedures in two types of markets: concentrated markets where fewer hospital providers control the market and have less competition and competitive markets where market power is dispersed among many hospitals that have greater competition.
Specifically, researchers sought to analyze whether hospitals in these markets reacted to lowered Medicare reimbursements with cost-shifting (the practice of increasing prices to private health plans to balance lower prices by public health plans).
Their study showed hospitals in concentrated markets focused on increasing prices to private insurers. On the other hand, hospitals in competitive markets tended to focus on cutting costs.
Read the Health Affairs abstract on hospitals' reaction to reduced Medicare payments.
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