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Studying the Problem of High and Variable Hospital Prices

lab photoThrough a unique experiential-learning health policy class, W&M undergraduates studied the problem of high and rising hospital prices in Virginia. In the Fall 2022 semester, three groups of students analyzed different aspects of this important problem, assessed possible policy solutions, and presented their findings and recommendations to staff of the Virginia Joint Commission on Health Care among other supporters of the W&M Public Policy program. The Virginia Joint Commission on Health Care is a standing commission of the Virginia General Assembly. 

The 13-week course, which was taught by Professor Jennifer Mellor, Paul R. Verkuil Professor of Economics and Public Policy and Director of W&M’s Schroeder Center for Health Policy, gave students an opportunity to learn hands-on about analyzing a pressing health policy problem while adjusting to data limitations.  The students obtained skills in problem-solving, critical thinking, teamwork, and collaboration -- skills needed to analyze and solve real-world problems across all policy areas.  The W&M student teams evaluated the literature, collected and analyzed data, and made presentations on hospital prices in the following three areas:

Describing patterns in the prices of elective procedures across and within hospitals. Using a novel source of data on prices for all ten types of services in the Commonwealth, this student team studied the degree to which prices for the same service provided by the same hospital varied, and looked into theories behind this. The team focused on the role of hospital market power and high price levels, as well as high degrees of variation within hospitals.

Improving price transparency regulations. This student team focused on what Virginia should do to improve hospital price transparency regulations. Price transparency refers to the degree of openness or general knowledge about the prices of hospital’s services and goods. The students recommended Virginia implement a statewide website to give users access to average out-of-pocket costs for procedures and services at specific hospitals.  They believed such a website could improve price transparency by giving Virginia residents a user-friendly way to access hospital information.  In addition, the students recommended that Virginia state employee health plans adopt changes in cost-sharing rules to give consumers a greater financial incentive to shop.

Addressing high hospital prices. Looking beyond price transparency regulations, this student team analyzed other ways for Virginia to address high hospital prices. Specifically, the students considered policies related to rate regulations and certificate of public need laws. Under rate regulations, hospital prices are either capped or set at a designated percentage of medical care prices as a way to reduce hospital prices. The students found that the impact of rate regulations on hospital prices varied because of the many different ways policymakers designed the regulations. Looking at another policy option, students studied how policymakers could use certificate of public need laws to increase the number of facilities in the state, thereby increasing hospital competition which would help lower hospital prices.

This experiential learning class is one of the many ways that W&M’s faculty and the  Schroeder Center for Health Policy helps to educate students about a broad array of public policies related to healthcare and health.