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The Price of Childbirth Can be Twice as High Even in the Same Hospital

The Price of Childbirth Can be Twice as High Even in the Same Hospital

According to HCCI's data, the price of a hospital admission for childbirth among birthing people with employer-sponsored health insurance (ESI) varies by a factor of three across hospitals within a local area. Even within the same hospital and within the same type of delivery, some births cost twice as much as others. Different prices for the same service in the same hospital with the same type of insurance reflect one of the most irrational facets of the U.S. health care system. Private insurer prices are the product of negotiations between hospitals and insurers and are influenced by a range of patient and market characteristics resulting in highly variable prices with little information for patients on what they might expect these prices to be when they receive care. These market dynamics leave birthing people facing unpredictable and considerably different costs depending on which hospital they go to or which insurance they have at the same hospital.

Earlier HCCI research showed that the average price of childbirth among people with employer-sponsored insurance (ESI) was $13,000 but varied by a factor of 2.5 across states and a factor of 4.3 across local areas. Even within the same metropolitan area, the price of childbirth at the high end was at least double the price at the low end of the range with a difference of about $12,000 on average. For example, in the Memphis, Tennessee metro area, the price of a delivery ranged from $4,475 to $17,113. In the San Jose, California metro area, the price of delivery ranged from $11,000 to $38,000.

A number of factors may contribute to the price differences we see in our data, including:

  • Negotiated rates between hospitals and insurers,
  • Practice patterns that lead to different delivery types or intensity of care, and
  • Underlying health and social determinants of birthing people in a local area.

To understand more about what is driving the range of prices we observe even within the same metro area, this analysis assesses differences in prices across hospitals and within the same hospital. Within the same local area, we find more variation across hospitals than within the same hospital, though there are a wide range of prices even within a single hospital in a single metro area.

Within the Average Metro Area, Childbirth Prices Varied Almost 3-Fold Across Hospitals in 2021

For a single service – inpatient admission for childbirth – different prices charged by different hospitals within the same metro area largely reflect hospital market power. A hospital within a metro area may be able to charge higher prices if they have more leverage in that area, potentially due to the services they offer, their reputation, or size (e.g., high market share). These hospitals gain leverage because health insurance plans would find it difficult to form a network attractive to enrollees without them, leaving the insurers in a position of having to meet hospital demands in terms of payment rates. Therefore, hospitals with more market power typically have higher prices for the same services than hospitals with less market power. 

Across the 116 metro areas we looked at, the median price of childbirth (i.e., allowed amount) at the most expensive hospital was nearly three times higher (2.6) than at the least expensive hospital. In 17 metro areas, the price of childbirth at the most expensive hospital was over five times the price of childbirth at the least expensive hospital. For example, in San Francisco, the median allowed amount for a childbirth admission was 7.8 times higher in the most relative to the least expensive hospital. In over half of metro areas, the price of childbirth was 2-5 times as high in the most relative to the least expensive hospital. In the remaining areas, the price of childbirth still varied across hospitals, but the price was less than double at the most expensive hospital than the least expensive hospital (Figure 1).

On Average, Childbirth Prices Within Hospitals Varied by a Factor of Two

Within the same hospital in the same local area, different prices for the same service typically reflect the balance of negotiating power between health insurers and hospitals. Insurers with more market power are better able to negotiate lower prices with hospitals. Therefore, when patients face different prices for the same service within the same hospital, this is generally due to which insurance plan they have. 

Across metro areas, within the same hospital, the price of childbirth at the high end (90th percentile) was, on average, two times the price of childbirth at the low end (10th percentile) (Figure 2). The Huntington-Ashland metro area (WV-KY-OH) had the lowest within-hospital price variation, though even there, within the same hospital, childbirth prices at the high end were 1.6 times as high as prices at the low end. The San Jose-Sunnyvale-Santa Clara area (CA) had the highest within-hospital price variation; within the same hospital, the price of childbirth at the high end was 3.4 times as high as the price at the low end.

Delivery Type and Complexity Do Not Explain Price Differences Across and Within Hospitals

Because the average price for childbirth may also reflect factors like physician practice patterns and the underlying health of patients, we looked at price variation among types of delivery and the complexity of the delivery.

As shown in Figure 3, we saw substantial variation in price across and within hospitals even when we limit our analysis just to c-sections or just to vaginal births. Among c-sections, the median price varied by a factor of 2.5 across hospitals, slightly below the overall variation of 2.8. Among vaginal deliveries, the median price varied slightly less from hospital to hospital (by a factor of 2, compared to 2.8 overall). Within the same hospital, variation in the price of c-sections and vaginal deliveries were virtually the same as deliveries overall (Figure 3).

We also looked at complicated and uncomplicated births separately since more complicated births may require additional services and payments, and birthing people with more complex needs may be more likely to go to certain hospitals within an area. Generally, across births with complications and comorbidities and births with no complications and comorbidities, prices varied by a factor of 2-3 across and within hospitals, similar to the aggregate results (Figure 4).

Among complicated births, we found a larger difference between the hospital with the highest median price and the lowest than we observe among births overall. Along with price differences across hospitals, this may reflect greater variation in the type of care that patients with complicated births need and differences in services across hospitals (e.g., one area hospital specializes in very complex births which result in more intensive and costly services). A similar pattern emerged within the same hospital, although the difference was not as great. Uncomplicated births, in contrast, had less variation than births overall both across and within hospitals.

Though patient differences and other factors may influence spending within each of these services, these results suggest that payment rates negotiated between the hospital and different insurers likely are the main factor underlying price variation.

Improving the Predictability of Spending on Childbirth Could Improve Affordability

Overall, the price of childbirth among people with ESI varied more from hospital to hospital than within hospitals. In some metro areas, the median childbirth price at the most expensive hospital was over 10 times as high as the price in the least expensive hospital. When we looked within hospitals, even in hospitals with the most price variation, prices for childbirth at the high end were six times higher than prices at the low end (the downloadable data include the median, 10th percentile, and 90th percentile within-hospital price ratios for each metro area; Figure 2 shows medians). This level of price variation for a relatively standard hospital admission within a local area seems hard to justify.

The variation we observe in the HCCI data reflects the relative market power of hospitals and health insurers in the area and how negotiations between these two parties impact payment rates. Our findings are consistent with there being more hospitals with substantial market power than insurers with substantial market power across the country. Variation is likely especially pronounced in areas with lower market competition and a lack of price transparency. Practice patterns and health, social, and structural factors also likely contribute to variation in prices.

The high costs of childbirth, and the impacts of these costs on families, has been well documented by HCCI and others. The fact that costs may vary considerably even within a local metro area may further burden families by making it harder to plan for these costs. Birthing people may not have a choice in insurance plans or the hospital at which they deliver; they may also not have access to pricing information and therefore, may be exposed to higher prices without any alternative. Payers, providers, and employers could improve the predictability of spending on childbirth through policies ranging from price transparency to efforts to reduce price variation through regulation or increasing competition.

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