A Bargain at Twice the Price? California Hospital Prices in the New Millennium

23 Pages Posted: 21 Jul 2009 Last revised: 10 May 2023

See all articles by Yaa Owusua Akosa Antwi

Yaa Owusua Akosa Antwi

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Martin Gaynor

Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation

William B. Vogt

RAND Corporation; National Bureau of Economic Research (NBER)

Date Written: July 2009

Abstract

We use data from California to document and offer possible explanations for the sharp increase in hospital prices charged to private payers after 1999. We find a downward trend in price for private pay patients in the 1990s and a rapid upward trend beginning in 1999, amounting to an annual average increase of 10.6% per year over 1999-2005. Prices in 2006 were almost double prices in 1999. By contrast, there was little discernable trend in prices for Medicare and Medicaid patients, although these prices varied from year-to-year. Surprisingly, the increase in prices is not correlated, geographically, with the change in hospital market concentration. For example, the greatest price rises came from hospitals in monopoly and highly concentrated counties which experienced little or no change over our sample period. Two recent California state hospital regulations, the seismic retrofit mandate and the mandatory nurse staffing ratio affected hospital costs. However, the cost increases due to the nursing staffing regulations are not large enough to account for the price increase, and the price increase is not substantially correlated with the costs of compliance with the seismic retrofit mandate. Therefore, the source of the near-doubling of California hospital prices remains something of a mystery.

Suggested Citation

Antwi, Yaa Owusua Akosa and Gaynor, Martin and Vogt, William B., A Bargain at Twice the Price? California Hospital Prices in the New Millennium (July 2009). NBER Working Paper No. w15134, Available at SSRN: https://ssrn.com/abstract=1434648

Yaa Owusua Akosa Antwi

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Martin Gaynor (Contact Author)

Carnegie Mellon University ( email )

H. John Heinz III School of Public Policy
and Management
Pittsburgh, PA 15213-3890
United States
412-268-7933 (Phone)
412-268-5338 (Fax)

National Bureau of Economic Research (NBER)

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Leverhulme Centre for Market and Public Organisation

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William B. Vogt

RAND Corporation ( email )

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Santa Monica, CA 90407-2138
United States

National Bureau of Economic Research (NBER)

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United States

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