Health Affairs has released a study finding that hospitals in areas with robust hospital competition tend to address shortfalls between Medicare payments and projected costs primarily by reducing hospital costs.  Conversely, the authors found that hospitals in areas where hospital care is concentrated among a limited number of providers respond by raising the prices they charge private insurers, in a practice known as “cost shifting”.  The authors argue that their findings necessitate a policy discussion about whether increased provider integration will interfere with the national health care reform law’s goal of reducing Medicare spending, as increased integration could reduce market competition and, in turn, increase the use of cost shifting.

Robinson, James. (2011). Hospitals respond to Medicare payment shortfalls by both shifting costs and cutting them, based on market concentration. Health Affairs, 30 (7): 1265-1271. doi: 10.1377/hlthaff.2011.0220. http://content.healthaffairs.org/content/30/7/1265.abstract

Author: James Robinson.