Washington made a bet. Force hospitals to post their prices, the theory went, and a real market would form and pull costs down. Five years on, the files are posted. The market never formed. Prices never fell. The disclosed data now run to enormous scale. Yet when researchers examined the posted files, they could not find a single hospital paid by all four major insurers on a common, fixed-price basis across both its inpatient and outpatient care. The disclosure happened. The market it was supposed to build did not.
The reason is not weak enforcement, and the answer is not a sixth rule. Every number in those files was set inside a market that the disclosure cannot discipline. In nearly half of metropolitan areas, one or two hospital systems run inpatient care, and commercial prices run about 2 1/2 times what Medicare pays, rising with a system’s market share rather than its costs. A price formed under those conditions records leverage, not cost. Taxpayers carry the same overpayment because public plans are benchmarked to the same captured rates. More disclosure makes the files cleaner. It does not make the number mean more because the thing it measures is bargaining power, and bargaining power does not reduce to an honest price.
A market cannot grade its own paper. That is why every fix built from the same data keeps failing. A cap pegged to a multiple of Medicare is still an administered number pulled from the captured rates, and a ceiling above the going rate becomes a floor that cheaper hospitals climb toward. Indiana’s largest systems already sit under the state’s pricing benchmark, in full compliance, without cutting a dollar. A regional median is the average of the same leverage. Each new remedy reaches into the same distorted distribution and ratifies the going rate it was meant to correct.
CONGRESS MUST CURE THE CORPORATE HOSPITAL BILLING EPIDEMIC
The discipline has to come from outside that market, and it does not need a statute. A buyer can name a real number now. In 2011, CalPERS, the California public employees’ fund, set a single price of $30,000 for a hip or knee replacement, a level dozens of California hospitals had already reached. Many hospitals charged far more. The fund set the number — no legislature did. The expensive hospitals cut their prices by about a third to keep the business, and almost no patients moved. The anchor was simply a real price for the same operation, the way any purchaser cites a competitor’s quote, and no agency or statute is involved. A buyer can reach for the clearest one available: what an accredited hospital charges elsewhere for a major operation, a fraction of the domestic rate, roughly $10,700 for a heart bypass against the $89,000 billed here. The gap is leverage, not cheaper labor, and the buyer names that number as its own walk-away price, not a rate it asks Washington to impose.
A market this concentrated cannot discipline itself; the rivalry that would set an honest price consolidated years ago. The number that market cannot produce will not arrive in another rule. The cure is a market act, a buyer choosing what to pay, not an administrator choosing for everyone. Washington does not need to set that price, and it should not try. A buyer can, today, by naming a number the captured market never would and declining to pay more.
Adam Cunningham is the founder of Sylk Health. David Introcaso is a co-founder of Sylk Health, a former evaluation officer at the Agency for Healthcare Research and Quality, and a former adviser to the House majority leader.