By Bret Jackson, President, Michigan Health Purchasers Coalition; Board Chair, National Alliance of Healthcare Purchaser Coalitions
For Michigan employers and working families, hospital costs have become more than a healthcare challenge — they’re an economic one. Hospitals now account for nearly half of employer healthcare spending in our state. That’s money that could otherwise be spent supporting job growth, wage increases, or innovation across Michigan’s industries.
As board chair of the National Alliance of Healthcare Purchaser Coalitions, I hear the same message from employers large and small across the country: rising costs, driven by corporate health system consolidation are unsustainable. In the National Alliance’s Pulse of the Purchaser Survey, 99% of employers identified hospital prices as a top threat to healthcare affordability.
Here are four things to know:
- Price Variations are Hard to Justify
Data increasingly show that what employers and families pay for care often depends less on quality and more on market power. My organization, the Michigan Health Purchasers Coalition, recently released its Price Transparency in Hospital Services Drugs, and Procedures Series, which found stark differences in what hospitals charge for the same procedures, at times even within the same health system. Research shows that:
- A common medication to treat inflammatory conditions had a $14,607 price difference within the same geographic area
- Vaginal and cesarean deliveries varied by $1,000-8,000 at a top-rated facility
- Hip and knee replacements within the Detroit-Metro area differed by more than $23,000
These price differences are hard to justify — and impossible for consumers to anticipate. For employers providing health benefits, where they and their employees choose to get care could save thousands — or even millions — of dollars, if they’re armed with the right information.
- Non-profit Health Systems and the 340B Program
Non-profit health systems are not immune to these extreme pricing variations, even though many participate in government discount programs such as the 340B Drug Pricing Program. While the program was created to help make care more affordable, too often large hospital systems historically use it to pad their bottom lines — purchasing medicines at steep discounts and then billing employers at inflated prices, pocketing the difference.
An IQVIA analysis found that this practice costs Michigan employers and working families more than $272 million annually. If we want 340B to serve its original mission, we need to ensure those savings go toward lowering costs for patients, not increasing hospital margins.
- Consolidation and Its Impact on Access and Prices
Consolidation is a growing challenge. Just three health systems now control nearly 60% of Michigan’s hospital market, leaving fewer options and less competition.
On top of this, health systems are buying up independent clinics and reclassifying them as outpatient facilities — allowing them to add “facility fees” for the same services. As a result, a routine mammogram or colonoscopy can cost up to 58% more in a hospital-owned setting. For rural Michiganders, especially in the Upper Peninsula, limited access and higher prices have become the norm.
- True Transparency Remains Elusive
You might expect that federal transparency rules would make information on hospitals’ pricing practices easier to access, but true transparency remains rare. As of late 2024, only 4% of Michigan hospitals were fully compliant with transparency requirements. Nine in 10 employers say this lack of transparency is a major barrier to managing healthcare costs effectively.
A Path Forward for Employers and Michigan
The data paint a clear picture; large corporate health systems’ unchecked pricing power, limited transparency, and growing consolidation are driving up costs across Michigan. This isn’t just an employer problem; it’s an economic issue affecting everyone.
Employers are increasingly concerned that rising hospital prices could make providing robust health benefits financially unsustainable. As policymakers in Michigan consider end-of-year healthcare priorities, like addressing the 340B program, hospital price transparency, and hospital financial assistance, it’s critical to assess all components of the bills to ensure the proposed solutions are reining in pricing abuses and providing true accountability and transparency.
Affordable, high-quality care should be a Michigan value — and with better data, smarter purchasing, and collaboration, it can be.