The Three Most Terrifying Words in Healthcare: Privately-Run Hospitals

PUBLISHED October 22, 2025

Hospital costs continue to climb and currently account for 31.2% of all personal healthcare expenditures. For patients, that means higher out-of-pocket expenses and rising medical debt, according to KFF, a health policy research organization. For HCA Healthcare, the nation’s largest for-profit hospital chain, it has meant a 5.6% rise in annual revenue.

So why do hospital bills keep going up? Since 2010, says KFF, hospitals have been merging together into larger health systems. This has led to a high degree of concentration, especially in metropolitan areas and has reduced the need for hospitals to lower prices.

Additionally, many hospitals are taking matters a step further and buying up local physician practices. This gives them more marketing clout and dampens competitive pressures. With more doctors under their employ, hospitals can perform more outpatient services in the hospital and get higher reimbursement rates from insurers—which are passed along to you. KFF notes that while market consolidation has led to increased patient costs, it is unclear whether the quality of care has improved.  

When commercial insurance carriers enter the picture, however, hospital bills shoot up even further. Hospitals charged commercial carriers, on average, 254 percent of Medicare rates for the same services in 2022, according to a study by Rand Healthcare, a research organization. 

Government-run VA hospitals are different. David Chan, an associate professor of public health policy at Stanford University, compared the quality of care at VA hospitals with that of privately-run hospitals. The VA system consists of both hospitals and clinics that offer universal healthcare to all veterans and resembles the public health systems we might see in the UK or Canada.

Chan found that VA hospitals outperformed their privately-run peers when it came to patient care and mortality reduction. Chan attributed the VA’s superior performance to better health IT capabilities, emphasis on primary care, minimal out-of-pocket expenses, and salaried physicians who have no incentive to either over-treat or under-treat patients.

In a separate study published earlier this year, Chan found that VA hospitals spend 21% less than privately-run hospitals to deliver similar care. Chan listed continuity of care and integrated care as two reasons for spending less.

If we use Medicare as a comparison benchmark, the sad fact for American consumers is that commercial insurers pay hospitals nearly three times as much as the VA spends for similar services.¹

Is it any wonder that 81% of all Americans are not satisfied with their healthcare costs?

¹Back of the Envelope Calculations

• VA hospitals spend about 79¢ for every $1.00 Medicare spends.
• Commercial insurers pay about $2.54 for every $1.00 Medicare spends.
• Put side by side, commercial spending is about $2.54 vs 79¢ → a little over 3 times as much as the VA.