Hospitals seek price hikes to offset rising nursing costs - WSJ

May 08, 2022 3:46 PM ETHCA Healthcare, Inc. (HCA)UHS, ELV, CNC, UNH, CI, CVS, HUMBy: Dulan Lokuwithana, SA News Editor188 Comments

Building with large H sign for hospital

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Amid surging nursing expenses, some hospital chains are looking to introduce hefty increases to treatment costs that could lead to higher premiums for employers and workers, The Wall Street Journal reported on Sunday.

HCA Healthcare Inc. (NYSE:HCA) and Universal Health Services Inc. (UHS) are said to be among hospital operators requesting higher payments from payors. Neither firm did not specify the level of the price hikes they seek, The Journal said.

However, people familiar with the talks say that some healthcare providers are seeking a 7.5% – 15% increase in their prices compared to the 4% to 6% price increases that hospitals typically seek.

Meanwhile, insurer and employer groups are pushing back as they point out that the priciest hospital operators, which are usually paid more than five times the rates paid by Medicare, can absorb the costs without price hikes.

The requests for price increases come as hospital operators are grappling with rising nursing expenses. According to Premier Inc., a healthcare data analytics firm, the average annual base pay for hospital nurses climbed to $86,674 in March, from $79,172 in June 2021.

The shares of HCA Healthcare (HCA) crashed after the company’s 1Q 2022 earnings last month as the company, which operates one of the largest hospital chains in the U.S. set its full year guidance below Street forecasts amid surging labor costs.

Hospital prices are typically set under long-term contracts with insurers and employers. With some discussions on new contracts unlikely to start until 2024, the delay will soften next year's health expenditure for some employers. However, some hospitals are said to be seeking contract renewals ahead of the schedule to add price hikes.

Hospitals in talks with health insurer Anthem (ANTM) are requesting a few to double-digit percentage point price increases over the historic rates, Bryony Winn, president of the company’s contracting operations said.

Commenting on the cost inflation of healthcare providers, Sarah London, Chief Executive of rival managed care provider, Centene (CNC) said at the recent earnings call: “The fact that our rates are contracted creates a buffer on that but obviously aware of the potential future impact.”

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