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Study: Indy hospitals charge 'excess' prices

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The Big 3 automakers spent 35 percent more in the Indianapolis area to provide health care for workers and non-elderly retirees than they did in other auto-heavy cities—and two-thirds of that difference can be blamed on “excess prices” by Indianapolis hospitals.

That’s the conclusion of an extensive analysis released this month by the Center for Studying Health System Change and the National Institute for Health Care Reform.

The findings of the study, released Feb. 15, show that General Motors Corp., Ford Motor Co. and Chrysler Group LLC paid an average of $7,900 per Indianapolis-area worker to cover health care expenses.

The average was $5,800 per worker in all 19 auto hubs considered in the study, which included Cleveland;, Detroit; St. Louis; Kokomo; Flint, Mich.; Youngstown, Ohio; and Buffalo, N.Y. Health care spending in Indianapolis was higher than all other regions except for Lake County, Ill.

Of the $2,100 difference between Indianapolis and its peers, roughly $1,400 was due to higher prices by hospitals. The rest could be blamed on the Indianapolis autoworkers being, on average, older and more heavily male than in the other cities.

“The study findings suggest that opportunities to control spending growth lie in restraining hospital prices and in improving people’s health status,” wrote study author Chapin White, a senior researcher at the Center for Studying Health System Change, a not-for-profit based in Washington, D.C.

Because the benefits for autoworkers and retirees (who are not yet eligible for Medicare) were all negotiated by the United Autoworkers Union, the richness of benefits was uniform in all cities, White noted.

White’s study was based on 2009 data from the private health insurance plans—mostly Blue Cross and Blue Shield—that helped administer the autoworker benefits, which are paid for by the auto companies themselves. Those data were collected by the market research firm Thomson Reuters.

Indianapolis-area autoworkers consumed 12 percent more in health care services than their peers in the 18 other auto hubs. That was mostly due their age and sex.

When White adjusted the autoworkers’ health care spending for those two factors, the Indianapolis workers had slightly better health than their peers in the other cities.

So the quantity of services in Indianapolis, when adjusted for age, sex and health status, was actually 4 percent less than the average in the other cities. This finding suggested that doctors and hospitals are not prescribing unneeded tests and procedures—at least no more so than their peers in the other cities.

But the big difference came on the price side. Even though it costs 3 percent less to operate health care businesses in Indianapolis than the 18 others cities, prices here were 22 percent higher.

When total prices and cost of doing business were combined, Indianapolis was the most expensive city in the study—with prices 26 percent higher than the average.

The blame for higher prices in Indianapolis rests almost entirely with hospitals, White’s study showed. He made this conclusion after comparing prices paid by the auto companies—through the Blue Cross and Blue Shield plans—against the prices paid by Medicare, the federal health plan for seniors.

Whereas Indianapolis-area physicians charged prices 4 percent higher than Medicare, hospital inpatient prices here were 78 percent higher and hospital ER prices were 200 percent higher than Medicare.

White tried to correlate prices with the health care wages, hospital quality scores or market concentration in each region, but found no clear explanation for the differences from one city to the next. In Indianapolis, hospitals paid slightly lower wages than their peers in other cities and posted somewhat better quality scores.

But market concentration in Indianapolis was actually lower—meaning the market should have been more competitive—than in the 18 other cities.

“Together, these findings suggest that the ability of hospitals to command high prices rests on factors that are not easily discernible in quantitative measures of quality or market concentration,” White wrote. But the prices in some communities, he added, “are clearly out of line.”

 

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  • GM Healthcare Comment
    Certainly, these numbers are reflective of numerous influences here in central Indiana. However, if GM and the UAW were to aggressively address unit cost, the manner in which they purchase healthcare here locally and member responsibility, the future healthcare costs could be managed to very favorable inflationary trends. However, it does require, as it does with other employers, a different approach to purchasing healthcare here in central Indiana. Indiana employers, in general, have not been willing to do so.
  • Keep Us Posted!
    THIS IS VERY interesting, is this anything like price fixing?
    You should have mentioned and factored in wages and cost of living for employees as well as how raises have been withheld or minimized to the lower level employees.

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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