Costs of hospitalizations in the US

October 31, 2023

I wrote last week about a Commonwealth Fund study on why health care costs so much in the US compared to other countries. An astute colleague asked, “what about high hospital costs in the US?” 

Indeed, the costs of hospitalization in the US are dramatically higher than in other developed countries, even after adjusting for cost of living. Some of this is due to higher personnel costs and higher administrative costs. Although most hospitals in the US are nonprofits, many have high revenue and high margins, and the average hospital fee is about 2.2 times the Medicare allowable fees.

Here are costs of two surgical hospitalizations in the US compared to other countries, from the International Federation of Health Plans. The graphs were created by the Health Care Cost Institute (2022).

Source: Health Care Cost Institute, July, 2022 LINK

Implications for employers:

-        Unit prices at hospitals remain high, although there are large price differences in some communities where high-quality care can be obtained at much lower costs.

-        In markets with little competition, price relief might require some type of price regulation. Hospital consolidation has meant that there is little competition in many hospital markets.

-        Centers of Excellence, high value networks, and bundled payments can help employers achieve higher value in hospital care.

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Coming Wednesday: What is the ‘real’ cost of GLP-1 medications for obesity?

Thanks for reading.  You can find previous posts in the Employer Coverage archive

Please “like” and suggest this newsletter to friends and colleagues. Thanks!