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Indiana’s not-for-profit hospital market is not a free market. In a free market, providers compete for customers. Customers shop for the best offer based on what they value most: high quality, low and knowable price, and great service.
Indiana’s not-for-profit hospital market more closely resembles the monopolized utility market. Opaque payment models and minimal hospital competition have led to high prices and extraordinary returns for our not-for-profit hospitals.
According to a recent analysis by Los Angeles-based RAND Corp., Hoosiers pay the seventh-highest hospital prices in the nation. If Indiana’s hospital prices were in line with the national average, Hoosier families would save an average of $2,500 per year. We must do more to bring down hospital prices and put money back into the pockets of Hoosier families.
One reason Indiana’s hospital market is not a free market is that consumers don’t shop for hospital care. Almost 90% of medical bills are paid by employers, insurers or the government. This convoluted payment structure lacks transparency. We don’t know how much a procedure costs. We don’t have visibility into the quality of a doctor or the service level of a hospital.
In a free market, consumers make buying decisions based on market research and recommendations from trusted advisers. In the hospital market, consumers make buying decisions based on physician referrals. Doctors refer patients to their employer’s hospital without regard to price or value. When is the last time an Indiana University Health doctor referred you to Ascension St. Vincent? Or vice versa?
Another reason Indiana’s hospital market is not a free market is because there is almost no competition between hospitals. Over the past decade, large not-for-profit hospital systems have swallowed independent practices and created virtual monopolies. History teaches us that monopolies set high prices and deliver mediocre service. A study performed by the Petris Center at The University of California-Berkley found that “residents of Indiana receive health care from poorly functioning markets that need immediate attention. … Hospital mergers are an important contributor to these high prices.”
As patients and employers struggle with the high cost of care, Indiana’s not-for-profit hospitals continue to earn record amounts while remaining tax-exempt. IU Health CEO Dennis Murphy recently called on Indiana’s hospital leaders to make political contributions to a gubernatorial candidate who he believes will defeat attempts to lower the cost of health care for everyday Hoosiers. In 2023, the Indiana Legislature called on the state’s hospitals and insurers to provide a plan to lower their prices to the national average by 2025. So far, only one hospital system has made this commitment. The industry’s silence is unacceptable.
Four years ago, we founded Hoosiers for Affordable Healthcare, an organization committed to reducing the cost of health care in Indiana. Our aim has been to lower prices, increase accessibility and promote market competition. We have supported legislation that bans physician non-compete agreements, eliminates hospital facility surcharge fees charged at off-campus medical offices and creates additional oversight for hospital mergers. We have supported legislation that promotes transparency and fair billing. We have supported legislation that collects hospital pricing data to allow policymakers to understand how much their constituents are paying for care.
As long as Indiana’s not-for-profit hospital systems continue to prioritize profits over patients, our work will not be done. The Legislature has taken commendable steps to reduce prices in recent years. We strongly encourage legislators to continue using every tool at their disposal to attack exorbitant hospital prices. Free markets demand choice for consumers and competition between providers. Indiana’s hospital market has neither.•
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Hubbard is chair of Hoosiers for Affordable Healthcare and partner and chair of E&A Cos.
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Seventh highest healthcare costs in the country? That seems about right given the poor ranking of IN with respect to smoking, obesity, sedentary lifestyle, maternal mortality, and education. In addition to addressing to complexities of healthcare economics (if indeed it is really a business), the State Legislature can act quickly and effectively to improve the health of Hoosiers by passing meaningful tobacco restrictions and taxes, facilitating access to maternal and post-partum care, removing costly barriers to care such as Prior Authorization requirements, and funding education to ensure physical education in our schools. The Legislature, to date, has punted on these fundamental health improvement policies influenced by special interest groups, industry, and a misunderstanding that to really reduce healthcare costs we must reduce the burden of disease which requires early intervention and a long range vision. This does not require delay or a need to reinvent the wheel. Potentially effective bills have been written and proposed. They just need to be acted upon apolitically for the betterment of Hoosier health.