The price of hospital services is driving health care costs and insurance premiums to climb nationwide

Patients and employers are impacted by increases health premiums. 
(Graphic by wildpixel/iStock/Getty+ via Conversation CC)

The American public may perceive hospitals as part of their community’s care network, but in reality, many hospitals and specialty clinics are businesses that strive to make a profit. 

As more medical systems in communities of all sizes have consolidated, hospital pricing has become the biggest driver of rising medical costs and steep health care insurance premium hikes.

“Health insurance premiums in the U.S. significantly increased between 1999 and 2024, outpacing the rate of worker earnings by three times, according to our newly published research in The Journal of the American Medical Association Network Open,” write economic experts Vivian Ho and Salpy Kanimian from Rice University in Houston, Texas, for The Conversation. 

Using federal information and data from the Kaiser Family Foundation, Ho and Kanimian found that “the cost of hospital services increased the most, while the cost of physician services and prescription drugs rose more slowly.”

Many hospitals, including those with nonprofit designations, often aggressively price their services and care well above their costs, Ho and Kanimian point out.

“One study found that for nonprofit health systems, the greatest pay increases between 2012 and 2019 went to hospital CEOs who grew the profits and size of their organizations the most,” Ho and Kanimian explain. In contrast, any emphasis on charity care by those systems was not linked to CEO pay. 

Ho and Kanimian suggest a way to help “ensure that nonprofit hospitals make the health of their local communities a top priority by requiring their boards to disclose their executive compensation guidelines for salary and bonuses, similar to the information that for-profit health care companies disclose to their stockholders.” Such a shift could help communities push for better care and lower costs for patients as determinants of executive pay and bonuses. 

Some economists suggest that “hospital prices should be regulated. This approach involves capping prices for health care services at the most expensive hospitals and restricting price growth for all hospitals,” Ho and Kanimian write.