Why Hospital Prices Keep Rising—And How Competition Can Help

Aug 24, 2026 07:00 PM - 1 hour ago 1

Prescription supplier prices fell 3.1% complete the past year, the sharpest yearly diminution successful much than six decades, according to caller information from the national Bureau of Labor Statistics. Hospital prices, meanwhile, roseate 5.2%.

Yet the immense mostly of Washington policymakers attraction their clip and attraction connected reducing supplier prices, not infirmary costs.

It’s easy to spot why. Just for illustration “Big Tobacco” successful the 90s, “Big Pharma” has go a boogeyman successful some parties. As investigation has shown, baccy kills and narcotics prevention lives. By contrast, voters thin to look favorably connected their section hospitals.

But if lawmakers want to really bring down healthcare costs, they’ll request to return connected the infirmary conglomerates that are disproportionately driving aesculapian inflation. That won’t require statist price controls. But it will require redoubling efforts to trim reddish tape, boost transparency and beforehand the marketplace title that leads to little prices.

Americans spent astir $1.6 trillion connected infirmary attraction successful 2024, according to the latest disposable national data. That was astir 31% of full healthcare spending of $5.7 trillion—considerably much than the $1.1 trillion spent connected expert and objective services, and astir 4 times the $467 cardinal spent connected medicine drugs.

Hospitals don’t simply relationship for the plurality of America’s healthcare spending. They’re besides raising prices faster than almost anyone other successful the healthcare industry. Between 2000 and 2022, infirmary work prices roseate by much than 220%, acold outpacing the wide ostentation complaint of 74% and the wide healthcare ostentation complaint of 130% complete the aforesaid period, according to researchers astatine Rice University’s Baker Institute for Public Policy.

Hospitals are charging ever steeper prices, successful ample part, arsenic a consequence of large wellness systems acquiring smaller facilities. Between 2016 and 2024, location were nearly 500 infirmary mergers, acquisitions and different changes of ownership, according to a caller UnitedHealth Group analysis. By 2024, nearly half of metropolitan infirmary markets were controlled by conscionable 1 aliases 2 wellness systems.

This has near insurers and patients pinch less alternatives—and ample infirmary systems pinch tremendous leverage erstwhile mounting prices. It should travel arsenic small surprise, then, that infirmary mergers wrong individual markets person been linked to value increases of 20% to 50%.

And according to a mounting body of research, consolidation hasn’t led to a accordant betterment successful quality. In fact, a 2020 study successful the New England Journal of Medicine recovered that infirmary acquisitions were “associated pinch modestly worse diligent experiences.”

Policymakers tin amended the value of attraction that patients receive—and slow the maturation successful spending—by moving to reconstruct title to the infirmary sector.

Price transparency is simply a bully spot to start. Patients request accusation astir what hospitals complaint truthful they tin shop astir for higher-value care. Federal infirmary transparency rules person been successful spot since 2021, yet compliance has been uneven.

One recent review recovered that conscionable 15.5% of hospitals disclosed existent prices for much than half of their negotiated charges, while 43.5% were posting less existent prices than they had the twelvemonth before.

Better enforcement of these requirements would make it easier for patients and employers to place much affordable providers—forcing hospitals to compete connected price.

Federal costs argumentation besides puts independent providers astatine a important disadvantage. Medicare often pays much for the aforesaid outpatient work erstwhile it is delivered astatine a hospital-owned installation alternatively than an independent physician’s agency aliases room center. At a caller legislature hearing, lawmakers noted that an ultrasound reimbursed astatine astir $164 successful a physician’s agency could person $339 successful a infirmary outpatient setting.

This has ne'er made overmuch sense. Medicare should not salary substantially different amounts for the aforesaid work simply because of the motion connected the building. Site-neutral reforms—which guarantee that Medicare pays comparable rates for comparable services—would destruct this disparity and put independent providers connected a much level playing section pinch ample infirmary systems.

States tin besides do their portion by removing barriers that protect incumbent infirmary systems from caller competition. Certificate-of-need laws—which are presently successful unit successful a majority of states—require healthcare providers to unafraid authorities support earlier opening definite accommodation aliases expanding services. Existing providers tin usage that process to support imaginable competitors retired of the market.

Repealing those laws would make it easier for caller providers to situation incumbents. Hospitals would person to activity harder to pull patients connected the ground of value and value alternatively than benefiting from authorities restrictions that limit the number of competitors successful their markets.

None of these betterment efforts requires Washington to enforce value controls. Policymakers conscionable request to extremity shielding incumbent wellness systems from the marketplace title that’d people thrust down prices.

For years, lawmakers successful some parties person disproportionately focused connected medicine supplier prices. The latest ostentation information propose it’s clip to displacement that focus. If Washington is superior astir making healthcare much affordable, infirmary prices—and the deficiency of title that allows them to support rising—deserve overmuch much scrutiny and reform.