Journal
HEALTH AFFAIRS
Volume 29, Issue 5, Pages 1045-1051Publisher
PROJECT HOPE
DOI: 10.1377/hlthaff.2009.0599
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A common assumption is that hospitals have little control over their costs and must charge high rates to private health insurers when Medicare rates are lower than hospital costs. We present evidence that contradicts that common assumption. Hospitals with strong market power and higher private-payer and other revenues appear to have less pressure to constrain their costs. Thus, these hospitals have higher costs per unit of service, which can lead to losses on Medicare patients. Hospitals under more financial pressure-with less market share and less ability to charge higher private rates-often constrain costs and can generate profits on Medicare patients.
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