Consolidation drives up cost of care

Oct 22, 2014 | Hospital Finance Efficiency

This blog has previously addressed the lack of health care cost transparency in the country today, and how it can lead to patients being underprepared for the cost of their treatment. Unfortunately, patients can experience such difficulties because the cost of certain treatments can vary widely from one facility to the next, making it almost impossible to anticipate the final amount owed. This problem has grown more pronounced with the rise of high-deductible insurance plans that force subscribers to pay more out-of-pocket-costs.

So just how can one facility charge their patients dramatically more for the same treatment or procedure? A new study conducted by Stanford researchers and published in The Journal of the American Medical Association has found that higher costs are usually a result of market consolidation.

As a result of the Affordable Care Act, there has been a trend of smaller practices merging with large providers, normally motivated by greater cost-efficiency as the result of shrinking reimbursements. However, study co-author Kate Bundorf, PhD, and Stanford's associate professor of health and research policy, explained to Stanford News Center says this trend can have unintended effects on health care costs.

"These larger organizations might have better processes in place to optimize care," said Bundorf. "But our research also points out, well, wait a minute: We also have to think about the effect on prices and try to balance those two things when we think about how to form policy about these organizations."

The study's authors have called for new policies that strike a balance between care optimization and economics. Rising health care costs can lead to many care facilities experiencing issues with accounts receivable management as a result of bad debt. If this is the case at your facility, the decision to outsource receivables management can help to improve cash flow and lower the number of dollars written off to bad debt.