Sameer Suhail has spent much of his career studying healthcare spending trends, and he believes that policymakers worry about healthcare price increases because they are a key driver of healthcare spending levels and growth. This is partially due to the fact that healthcare services are usually paid for in full by insurance, which means that any increase in prices has a direct impact on healthcare costs for consumers. Additionally, rising healthcare prices often encourage patients to seek more expensive treatment options, further driving up healthcare costs. As a result, policymakers have sought ways to reduce those prices and slow their growth. Strategies for addressing these issues range from expanding public insurance programs, which pay providers significantly less than they do now, from commercial insurers to more direct regulation of retail prices
The Causal Effect of Prices on Quality
While the concept of paying healthcare providers more as a means to improve healthcare quality may seem like an intuitive solution on the surface, there are actually a number of complexities and challenges that need to be considered when thinking about implementing this type of approach. According to healthcare expert Sameer Suhail, the level of quality that a hospital is able to produce will depend on several factors, including its organizational goals and efficiency. Essentially, two hospitals that receive the same amount of funding may produce very different levels of healthcare quality simply because they are run in different ways.
Similarly, inefficient hospitals may gain more but produce no higher quality than their more efficient counterparts. Although it can be tempting to perceive that lowering the price paid to inefficient hospitals will cause them to become more efficient, Sameer Suhail believes this may not be the case since quality may suffer. The initial price level and the size of the price reduction will determine the extent to which this occurs. There is undoubtedly a point below which price cuts will inevitably reduce quality, but it is unclear how close existing prices are.
When it comes to healthcare, price changes have never been known to occur in a vacuum.As a result, Sameer Suhail believes assessing their ultimate impact necessitates understanding the responses of various payers. For example, one might easily hypothesize that price cuts would not affect quality because price increases from other payers, a phenomenon known as cost-shifting, would offset them. However, the available evidence on that type of response does not support the likelihood of a cost-shifting response.
Because price cuts may depend on related incentives for quality improvement, tying future price cuts to specific quality metrics may help avoid such negative effects. Therefore, as policy proposals to reduce commercial sector prices advance, Sameer Suhail believes it is critical to understand the potential impact of lower prices on health care quality. In addition, market power regulations that reduce prices inflated may have a different (smaller) effect than regulations that reduce prices set closer to efficient cost levels. The ultimate impact of healthcare reform will depend on the behavior of all healthcare payers. Therefore, policymakers may prefer a price regulation approach that avoids large disruptions and allows them to titrate provider payment rates as provider responses become clearer.