Variation in hospital inpatient prices across small geographic areas.

Objectives: To examine whether market competition may influence the difference in the inpatient price per discharge between public (Medicare) and private payers across small geographic areas.

Study Design: Retrospective multivariate analysis.

Methods: Data came from the 2006 Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases (SIDs) in 162 counties from 6 states where an HCUP price-to-charge ratio (PCR) was available. The SIDs were linked with the Area Resource File, American Hospital Association Annual Survey Database, and US Census Bureau data files. Hospital inpatient prices were estimated by applying the HCUP PCR to total hospital charges. Payer-specific price comparisons were made for all discharges, an acute condition (acute myocardial infarction), and an elective condition (knee arthroplasty). Ordinary least squares models were used to examine the effect of market competition on the inpatient price per discharge by payer.

Results: Greater geographic variation was found in the inpatient price per discharge among private than public payers for most hospital services. Hospitals in more concentrated markets were associated with a higher price per discharge among knee arthroplasty discharges for both payers.

Conclusions: Hospitals charged significantly higher prices to private than public payers. Because the payment policies from Medicare ultimately affect private payers, public policy efforts that take into consideration market-based approaches or payment reform may help to reduce price variations.