The LA Times and the Palo Alto Daily News reported on a study on hospital prices commissioned by “the California Public Employees’ Retirement System, the nation’s third-largest health benefits purchaser, and the Pacific Business Group on Health, which represents 50 large employers that spend $10 billion a year on healthcare for workers and retirees.” The Palo Alto Daily News, home to silicon valley’s venture capital, titled its story simply: Report: Hospitals Overcharge.

Well, well, well - someone has finally belled the cat.

CALPERS and the Pacific Business Group on health are very powerful and influential political and economic centers in California, but also have significant pull across the United States. Many trends in health care and employee benefits have been validated once adopted by either of these groups — as they are two key thought leaders in the field of health care and benefits. Once CALPERS and/or the Pacific Business Group adopt a specific type of policy, it is copied by many other businesses and health care purchasers nationwide.

The fact they commissioned a study on hospital prices shows that there is serious concern about hospital pricing and it being the driver of health care inflation.

The ultimate economic effect of this inflation is that the middle class is being priced out of the health insurance market place, and therefore, a plurality of Americans now want either government run or government financed health insurance for all.

The intellectual framework for hospital prices driving the U.S. health care inflation is as follows: hospitals can raise their prices in tandem and in unison with each other due to a waiver granted by the Clinton Administration about 10 years ago from anti-trust enforcement. This means that third party consultants review hospitals prices in a given geographic area and can give, in detail, the prices of every item sold or every service performed by the hospital down the street, to any other hospital in the area. This, over time, creates a symmetry of pricing that differs at virtually no level, or on only services that one hospital clearly has an advantage over the other.

Furthermore, because hospital prices are not like the gas stations on the corner where the prices are clearly displayed for all the public to see, most doctors and patients have absolutely no clue what the hospital has or will charge, and even when they see the “bill” need to consult experts to see what the prices for what services or products were — after the fact.

In fact, hospital pricing is more akin to the price you or your insurer pays for a plane ticket. There are a huge and wide variety of different ticket prices — but in the hosptial’s case, these variations in prices are not made public, and those with the highest “discounts” keep their prices they get from hospitals secret from their competitors.

So, those who get the discounts won’t say what they are, have contracts with hospitals that prevent any other entity from getting similar discounts and the discounts vary radically depending on whether or not the two or three hospitals in the geographic region are in lock-step in their pricing, and to what extent there is a hospital who is not willing to play the let-all-price-our-services-the-same game.

Furthermore, increases in hospital pricing drives the premium increases seen in insurance policies over the last ten years. Insurers, who earn a percentage profit on the premium, are reasonably happy to see a steady increase in hospital pricing because that means a steady increase in premium prices, which in turn means a steady increase in the dollar amount, if not the percentage amount, of the insurers profits.

Notwithstanding all of the price transparency chest-pounding being done by hospitals, the only set of prices they release are the retail price — these are the oil sheik prices that only rich foreigners pay, or that the uninsured are billed.

These are the prices that are being released by hospitals — to the extent that they release any prices at all. But these are not the prices of the services that they sell the most of, it is the prices they sell the least number of services for — and are very expensive prices.

Until consumerism gets hospitals to release all of their prices — the consumer health care marketplace cannot function properly. Without transparent prices, the market system fails.

Walking into a store, getting an item and finding out weeks later what it will cost you — and a huge dollar amount at that — is the current hospital pricing system in a nutshell. Plus, in many cases, your life, or the life of a loved one depends on having access to that item in the store with no prices. And if your life is not at stake, being able to live pain-free or be well enough to make a living is often what is at stake.

Not buying these items, therefore, is not much of an option.

This is why many in the non-hospital industries associated with health care focus on what Medicare pays by procedure. It is not that the associated industries have any love for government set pricing.

It is simply that the hospitals leave no other choice for any sort or real price list that makes any sense or has any relevance to the rest of the marketplace.

This is the hospitals own fault, by playing secret-squirrel with their prices, they force everyone not on their most-favored nation price list to look to Medicare prices for a baseline.

Is it no wonder then, when doctors and patients have no idea what prices hospitals charge for services or products (even after they get the bill) that hospitals, in this environment, have found they can charge whatever they want, and people will pay it? And, as a kicker, most people have no choice but to use the service being offered, have no place else to go, and if they do find somewhere else, cannot find out the price the “competitor” charges and if they do, will likely find that the “competitor’s” price is about the same.

But why believe me? Here is what Peter V. Lee, the chief executive of the Pacific Business Group on Health said, after reviewing their study in detail, and releasing it to the public:

“The report underscores what we have long suspected: that some hospitals are basing their prices to private insurers and patients on what they can get away with.”

Which means you see year-over-year health care inflation that is double the rate of inflation for every other sector of the economy, and millions of Americans are priced out of the health insurance market.