Hospitals raise prices for assessment and management services

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According to a new study, hospital costs for services such as emergency room visits and initial hospital care continue to rise faster than other types of care.

Hospitals increased their median fees for assessment and management services by 7% and associated negotiated rates increased by 5%, according to FAIR Health’s analysis of high-frequency claims from November 2020 to November 2021 from from their database of over 36 billion claims. Hospital E/M charges and negotiated rates—excluding facility fees—have increased the most over this period of the six categories studied by FAIR Health: office E/M services; non-E/M services such as psychiatric care, dialysis and vaccinations; radiology; transaction; and pathology and laboratory.

E/M hospital service price inflation topped all other categories surveyed by the nonprofit research firm for the fifth straight year. Associated median charges jumped 6% and negotiated rates jumped 10% from November 2019 to November 2020.

“It will be interesting to see how much things change, like with what we saw with the No Surprises Act,” said Robin Gelburd, president of FAIR Health.

The No Surprises Act aims to reduce health care costs by protecting patients from surprise bills, such as when someone is unexpectedly billed for an out-of-network specialist at an in-network facility. The site’s independent payment policy, whereby Medicare pays hospital outpatient services and independent doctors’ offices at the same rate for E/M services, and the price transparency rule serve similar purposes. Yet many hospitals are failing to meet the transparency mandate.

In addition to federal law, there has been an array of state-led interventions that seek to control health care systems through price caps and cost growth benchmarks. But many of those efforts have yet to significantly limit annual price increases, policy experts said.

Rising hospital costs and negotiated rates indicate there continues to be a lack of competition, said Barak Richman, a law and business administration professor at Duke University. The data may reflect hospital acquisitions of medical practices, which tend to lock in hospitals’ market share and their control of patient flows, he said.

“Rising hospital charges and amounts allowed suggest we’re still headed in the wrong direction,” Richman said. “The fact that the rate of progress is faster than other categories means that we continue to accelerate in the wrong direction.”

Fees and negotiated rates for hospital E/M services have increased steadily since 2012, outpacing all other categories. Related fees jumped 28% and negotiated rates jumped 26% from May 2012 to May 2017, according to data from FAIR Health. Hospital E/M charges and negotiated rates both increased by 7% from November 2017 to November 2018.

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