As healthcare reform continues to impact revenues for medical labs and anatomic pathology groups in an effort to reduce healthcare spending, researchers reinforce claims that prices are to blame, not quantity or quality of care

All facets of the US healthcare system—be it massive health systems, medical clinics, independent anatomic pathology groups, or medical laboratories—are experiencing pressure as healthcare reform attempts to manage ever-growing healthcare spending.

Current healthcare trends in the United States focus on determining medical necessity, adopting personalized medicine, and on determining the value various aspects of care. What these trends have in common is a goal of lowering the cost of care while contributing to improved patient care. However, research dating back as far as 2003 suggests overall prices play a significant role in US healthcare spending, particularly when the cost of care in the US is compared to the cost of care in other developed countries.

US Spends More on Healthcare than Any Other Country

A study published last year was the subject of a recent story in the New York Times about why healthcare costs in the United States are so much higher than in other developed nations. The NYT story referenced multiple studies on the subject that all made a similar conclusion: utilization of healthcare in the US is at or below the median compared with other developed nations, and it is higher prices for these services that causes healthcare in the US to be so expensive.

Health Affairs published one such study in 2003, titled, “It’s the Prices, Stupid: Why the United States is So Different from Other Countries.” Written by Gerard F. Anderson, PhD; Uwe E. Reinhardt, PhD; Peter S. Hussey, PhD; and Varduhi Petrosyan, PhD, the paper compared data from the Organization for Economic Cooperation and Development (OECD) for 30 member countries in 2000.

“The data show that the United States spends more on healthcare than any other country. However, on most measures of health services use, the United States is below the OECD median,” researchers state. “These facts suggest that the difference in spending is caused mostly by higher prices for healthcare goods and services in the United States.”

In a New York Times article, Austin Frakt, PhD (above left), Health Economist with the federal Department of Veterans Affairs, and Aaron E. Carroll, MD (above right), pediatrician and Professor of Pediatrics at Indiana University School of Medicine, collated the various research into healthcare spending conducted in the past decade and a half. (Photo copyrights: JAMA/The Accidental Economist.)

“What was true in 2003 remains so today,” Ashish Jha, MPH, a physician with the Harvard T.H. Chan School of Public Health and the director of the Harvard Global Health Institute, told The New York Times (NYT). “The US just isn’t that different from other developed countries in how much healthcare we use. It is very different in how much we pay for it.”

New Data Shines the Spotlight on Old Concerns

Using data spanning from 1996 to 2013, researchers published similar findings in a 2017 JAMA original investigation. “Healthcare spending increased by $933.5 billion from 1996 to 2013,” stated study authors Joseph L. Dieleman, PhD, Assistant Professor at Institute for Health Metrics and Evaluation; Ellen Squires, MPH, Policy Analyst at Kaiser Family Foundation; and Anthony L. Bui, MPH, MD Candidate at David Geffen School of Medicine, UCLA Health. “Service price and intensity alone accounted for more than 50% of the spending increase, although the association of the five factors with spending varied by type of care and health condition.”

The JAMA study authors noted they could not separate price and care intensity in their data. However, as pointed out by NYT, four other studies published by The National Bureau of Economic Research, the OECD, JAMA, and the Annals of Internal Medicine between 2010 and 2017 also link the cost of care directly with healthcare spending in the US.

“The JAMA study found that, together, [care intensity and pricing] accounted for 63% of the increase in spending from 1996 to 2013,” noted The New York Times, “In other words, most of the explanation for American health spending growth—and why it

has pulled away from health spending in other countries—is that more is done for patients during hospital stays and doctor visits, they’re charged more per service, or both.”

For example, the OECD pilot study from 2010 states, “One of the key findings of the pilot study is that the price level of hospital services in the United States is more than 60% above that of the average price level of 12 countries included in the study.”

The More Things Change the More They Stay the Same

As a cornerstone of economics, transparency in both pricing and quality serves to empower buyers—or in this case patients—to choose products and services based on their overall value. This, in turn, encourages competition and helps to keep prices in check.

However, the US healthcare system offers little transparency—either for patient outcomes or for the prices to be charged—with many patients not having any clue what a service will cost until the bill for their recent hospital stay, lab tests, wellness visit, or ER visit arrives. This has led to increased pressure from employers and patient advocates for hospitals, clinical laboratories, and other service providers to make this information available to the public.

Yet, the opposite scenario is the current reality. Lobbyists and groups representing hospitals, insurers, pharmaceuticals, and other facets of the healthcare system continue to promote legislation at the federal and state levels to keep this information private and away from both the public and their competitors.

The NYT highlights the balance surrounding the issue citing claims of increased innovation with higher prices. However, this only works if the market can support said prices. “Though it’s reasonable to push back on high healthcare prices,” NYT’s noted, “there may be a limit to how far we should.”

—Jon Stone

Related Information:

Why the US Spends So Much More than Other Nations on Health Care

Decomposing Medical Care Expenditure Growth

Comparing Price Levels of Hospital Services Across Countries

The Anatomy of Healthcare in the United States

Price and Utilization: Why We Must Target Both to Curb Health Care Costs

Factors Associated with Increases in US Health Care Spending, 1996–2013

It’s the Prices, Stupid: Why the United States is So Different from Other Countries

US Health Care from a Global Perspective