The Amish and hospital prices: the impact of a cash-paying population

There is great interest in the extent to which increased patient cost-sharing can affect health care utilization. Less attention has been paid to the potential effect on health care prices. Provider ability to discount prices for insured patients with high deductibles is constrained by the allowed amounts established through negotiations with carriers, and offering lower cash prices to insured patients would be a violation of these contracts. The existence of uninsured patients provides an opportunity for providers to potentially engage in greater negotiation on price, yet the vast majority of uninsured patients have low incomes and have limited access to providers or may use care that results in provider debt. In fact hospitals often cite bad debt from uninsured patients as a justification for raising prices to other payers.

The Amish, a religious group of approximately 300,000 that resides in rural areas in a number of states, represent a unique example of an uninsured cash-paying population. Their religious and cultural practices prohibit use of commercial insurance, and additionally discourage indebtedness and litigation. They are industrious and tend to be employed in agriculture, construction, and other entrepreneurial activities.  Additionally, their residential patterns are organized around districts, which contain approximately 150 households. Often multiple continuous districts comprise larger settlements, which may contain as many as several thousand members. Since the Amish live in low density rural areas, and tend to have large families, they often comprise a relatively large share of the population in the local communities in which they reside. While the Amish, who are also called the “Plain People”, eschew many modern conveniences such as automobiles and electricity, they do make use of mainstream medical services. They therefore represent a potentially important share of hospital market areas in some locations.

We tested the relationship between Amish population settlement and hospital prices, using 2013 zip code level data on Amish settlements, uninsurance and other socioeconomic characteristics, and hospital financial information. We restricted the analysis to seven states where the Amish population exceeded 10,000 – Pennsylvania, New York, Ohio, Michigan, Indiana, Wisconsin, and Missouri and found that zip code level Amish population was significantly and negatively related to the hospital charge-to-cost ratio. These results are consistent with the theory that provider prices may adjust in response to the presence of a significant cash-paying population. Without more information on how commercial prices are negotiated, it is not known whether or how this presence of this cash-paying population may affect prices paid by other payers in the market, but this is clearly an area for future research.