Grand Valley data says cheap Medicare comes with price — sky-high rates for private insurance

Grand Valley data says cheap Medicare comes with price — sky-high rates for private insurance

Dr Michael Pramenko examines a patient at Family Physicians of Western Colorado.



Grand Junction’s reputation as having one of the most affordable health care systems in the nation has been tarnished.

While health care experts in the Grand Valley know what they’re doing when it comes to providing indigent and elderly care, it’s coming at a high price for everyone else.

A new national study released last month shows that while places such as Grand Junction and a few select cities in the nation have figured out how to offer better, cheaper care for those on Medicare, commercial ratepayers are footing the bill.

Still, the study, which showed that areas that have the lowest costs for Medicare also have the highest commercial rates, is only the beginning of a larger problem, local health care experts say.

But how to fix the problem of skyrocketing hospital pricing on medical procedures for commercial payers, and the insurance premiums to cover those costs, is far more complicated.

The study

Last month, a group of researchers from Yale University, the University of Pennsylvania, Carnegie Mellon and the London-based Centre for Economic Performance released a first-of-its-kind study under a joint program called the Health Care Pricing Project.

That project produced what is expected to be the first of several studies on health care costs, which examined hospital pricing under Medicare and compared it with never-before-released data on what hospitals charge private insurance companies for the same procedures.

It found, among other things, that costs were dramatically higher for employer-sponsored insurance provided by three of the nation’s five largest insurers, particularly in areas that have only one or two hospitals.

The study cited Grand Junction’s experience specifically because the valley has been an exemplar for the nation when it comes to providing health care for the poor and the elderly. President Barack Obama brought national attention to the valley’s efforts in a 2008 speech at Central High School as a prelude to what later would become the federal Affordable Care Act.

The study confirmed that Grand Junction does indeed have the third-lowest spending per Medicare beneficiary among the 306 hospital referral regions it examined nationwide, but also had the ninth-highest inpatient prices and 43rd-highest spending per privately insured beneficiary in the nation.

The study found similar results in other areas of the nation that also have low Medicare spending programs, such as Rochester, Minnesota, and La Crosse, Wisconsin.

The study’s researchers said a large part of the issue was that those areas also have hospitals that have near monopolies, such as St. Mary’s Medical Center in Grand Junction, concluding that a lack of competition was contributing to the higher prices for private insurers.

“The average insurance policy for a family of four is $16,000 ... and what this is showing is why those plans are so expensive,” said Zack Cooper, assistant professor of public health policy at Yale University’s Institute for Social and Policy Studies and of Economics, one of the researchers in the study. “Even for the folks with full insurance coverage, out-of-pocket costs are basically the second-leading cause of payday loans and one of the leading causes of personal bankruptcy.”

The marketplace

While the study blamed a lack of competition for the pricing disparity more than anything else, local health care experts said the problem is much bigger than that.

Because of the distance from larger hospital markets such as Denver and Salt Lake City — which have far lower Medicare and private health care spending than the Grand Valley — vastly fewer number of patients to serve, and the higher costs associated with attracting quality medical professionals to rural areas, it’s natural for prices on medical procedures to be higher in such areas as Grand Junction, local experts say.

Additionally, trying to equate free-market principles to health care doesn’t always work, said Steve ErkenBrack, president and chief executive officer of Grand Junction-based Rocky Mountain Health Plans.

“For example, in Grand Junction, we’re going to have 450 to 500 babies born in a given year. Period. That’s it,” ErkenBrack said. “It doesn’t matter how many hospitals or places are delivering those babies, people are only going to have so many. If you have 200 of those babies being born in a different facility ... then the cost is being spread over 300 babies, which drives the cost up. If you have efficiencies of scale, then you have to have something other than competition that’s going to bring the price down.”

Competition, then, only works when all things are equal. It goes out the window, particularly in health care, when there are medical complications. When that happens, St. Mary’s has long argued that it is more equipped to deal with such complications, and that always comes at a higher cost.

Still, it’s just that competition that Chris Thomas, president and chief executive officer at the valley’s second-largest medical center, Community Hospital, hopes to address with the soon-to-open brand new hospital that it’s building near 24 and G roads.

Though smaller than St. Mary’s, the new facility will offer more services than it ever has, including an obstetrics ward.

Thomas said building a new facility not only will help his hospital attract more patients, and more profits as a result, but also could prompt his competitors to react by lowering their prices.

“Then we’re going to have to compete on quality and service and price, but that’s what we’ve been saying for seven years now,” he said. “We think competition is good. If someone says, ‘Chris, I’m not going to go to you because of higher costs,’ I’m going to say, ‘OK, I’d better do something about it.’ I think that’s good for the community. If we end up with two solid hospitals, consumers are going to have a choice. The other hospitals in town, they’re going to be in the same boat.”

While Community Hospital is a stand-alone nonprofit facility, St. Mary’s is part of a national chain of nonprofit hospitals called Sisters of Charity of Leavenworth, or SCL for short, which operates 15 hospitals and medical clinics in Colorado, Kansas and Montana. St. Mary’s is one of the more profitable in the network.

According to its 990 tax return forms filed with the Internal Revenue Service, St. Mary’s pulled in about $421.4 million in total revenues in 2014, leaving it about $33.8 million after expenses. That after it made “system allocations” of about $44.1 million to SCL that same year, up from about $33.3 million in 2013.

 

Spreading costs

Randy Pifer, a health insurance broker and benefits adviser at Active Insurance Solutions in Grand Junction, said many of his clients, individuals and businesses alike, are quickly getting fed up with rising premiums and deductibles as a result of the higher prices for medical procedures.

As a result, an increasing number of businesses are opting not to offer health coverage for their employees, and those workers are finding it hard to find affordable coverage on the open market, including through the state’s health care exchange, he said.

Pifer said the federal health care law isn’t helping them because they make too much money to qualify for tax credits, but not enough to pay for health care and all their other bills.

“The long and the short of it is, new rates that were effective Jan. 1, 2014, to new rates that are now effective Jan. 1, 2016, individual policyholders across the valley have basically seen an increase in excess of 100 percent,” Pifer said. “I’ve had numerous of my own personal clients this year just forgoing the insurance. They don’t qualify for the tax credits because they are $1.02 above the limit, so therefore they get absolutely zero. They’re just going to forgo the insurance outright because it’s either that or continue to make their house payments.”

 

Integrating care

Brian Davidson, interim chief executive officer at St. Mary’s Hospital, the region’s largest, said pricing decisions are based on costs of providing services to an area that otherwise wouldn’t have it.

“When you’re in a big market and you have multiple players, competition does well to lower your prices,” Davidson said. “St. Mary’s wants to provide as many services as possible to as many people. Sometimes that costs money. We want to have a cardiac surgery program. We want to have high-risk obstetrics. Many of these programs either break even or lose money. But we want to provide those services because that’s what the community needs.

“So we don’t have the option of economies of scale of adding more, and getting more business,” he added. “You’re going to have a set population. It’s not going to grow.”

Dr. Michael Pramenko, a family physician at Primary Care Partners, 1120 Wellington Ave., in Grand Junction, said too much expansion by hospitals in the valley has contributed to hospitals setting higher prices for their procedures to pay for additional staff, space and new services.

He said the study’s results come as no surprise to him and other medical professionals in the valley, saying it’s something he’s been talking about for years. That’s partly why he pushed for a clinically integrated network of folks to help provide health care at a lower cost.

That network, called Monument Health, is the product of Pramenko’s practice, St. Mary’s Hospital and Rocky Mountain Health Plans.

Like the valley’s Medicare model that’s been emulated elsewhere in the nation, the network integrates all players: medical professionals, hospitals and an insurance company.

But more than that, it also has implemented a fundamental change in how hospitals and doctors are compensated. Rather than the age-old fee-for-service that has long dominated the health care field, Monument Health has replaced it with one based on value. So instead of paying medical bills based on services regardless of outcomes, doctors, clinics and, ultimately, hospitals are being paid for actually fixing a medical problem.

Think of it like the roofer that homeowners hire.

Homeowners will contract with a roofing company to replace the shingles, paying a final bill when the work is done. If the roofing company failed to do the job correctly, such as a leaky roof or shingles blowing off during a hard wind, the company returns to fix the problem at no cost.

In health care, current payment models don’t work that way. Patients and insurers pay each time they see a health care professional, whether their medical issue was fixed or not.

Like Pramenko and others in the valley, Davidson agrees that the current system isn’t sustainable, saying that’s why St. Mary’s got involved in the Monument model.

“What we can do is we can work together to bring costs down, and how we do that is to partner with the folks who are used to running an insurance product, and we need to work with primary care doctors,” Davidson said. “Why hospitals need to partner with those folks to control costs is by the time somebody needs the hospital, we’re the acute care provider. We need to go back through clinical integration, to the primary care physician and the insurer to make sure that patients are taken care of well in advance of needing us.”

Community Hospital is about to do something similar, though starting with Medicare patients.

The hospital, in conjunction with Family Health West, Western Medical Associates, Western Valley Physicians and Grand Valley Family Practice, recently received federal approval to start a National Rural Accountable Care Consortium program for Medicare patients.

Thomas said he hopes, eventually, to fold practices used in that program to include commercial insurance payers, thus lowering costs to those patients, too.

“Where I see this pilot project helping us is, we’re going to build tools around the Medicare population, but try to then integrate them in all the rest of our practices,” Thomas said. “So then, we’ll use the same care coordinators, the same health coaches, the same nutritional educators that we’re being incentivized for this Medicare program. They’re going to be in our clinics, which see commercial insured people, they see Medicaid. It won’t be very long before Blue Cross/Blue Shield says, ‘Hey, we’re going to pay you that way, 
too.’ “

 

Transparency

While Yale’s Cooper disagrees with some of what local medical experts are saying when it comes to competition, he does agree that a value-based payment system is a good way to address the problem of rising health care costs.

To him, the best way to get there is through more transparency.

His study was possible because of changes in law that require hospitals to publicly show their negotiated prices with private health insurance companies.

As that information works its ways to the consumers — patients and insurance companies that have to pay the bills — hospitals and doctor-run clinics will be forced to give up the old way of being compensated for their work.

“The next paper coming down the pike is looking at growth, and the growth in spending, because in many ways that’s actually even more problematic than the pricing levels, which is what this study looked at,” he said. “The reason that’s so important is because the growth in health care costs is what’s crowding out the growth in people’s wages, and that’s what’s leading to debt, for private individuals and government entities alike.”

Cooper, like local health care experts, said there will not be one or even two fixes to the system. Health care, Cooper said, isn’t just a single issue.

To control health care costs, all players are going to have to adjust, Cooper said. Doctors and hospitals need to be paid differently, and patients and insurance companies need to be more cognizant of what they are paying, and choose hospitals accordingly even if they are miles away.

The best way to achieve that, particularly in a free-market system — as opposed to going to a single-payer, government-run network — is to keep all of it transparent to everyone, he said.

“The idea that I shouldn’t know the prices of my health care services is just crazy,” Cooper said. “We need those prices to be transparent. This idea that health care costs are somehow fixed and that hospitals have no control is exactly what the problem is. Right now we have a system that hospitals make more money when patients do worse, because that means they come back.

“Part of this research is it makes it hard not to look at the problem,” he added. “When we didn’t have data and we didn’t know what was happening, you could sort of say, ‘Well, you’re paying for value or whatever other crap that people said.’ Now we have really good data. We need more competition and more transparency. If that doesn’t work, we’ll have to get more draconian and regulate prices.”


COMMENTS

Commenting is not available in this channel entry.
Page 1 of 1


Duh,  when reform is implemented of course costs are going up.  Now more people have insurance who never had it before so now they are getting treated BUT their insurance is covering part of the cost!  Insured have always paid for the uninsured to get treatments!  That is why premiums are outrageous and you pay $50 for an aspirin!  Those who believe that the medical community doesn’t need reform are naive at best!

The issue is REFORM!  If it isn’t going to be Obamacare then it needs to be something else!  Politicians need to stop fingerprinting and bitchin and moanin about the other side of the isle and come up with resolution to issues of cost and care!  Families should not be bankrupt over seeking healthcare!

This article was a good start.  It follows three recent articles published in the New York Times and Denver Post. It would be interesting to see (1) how much the insurance executives and hospital administrators earn in total compensation and (2) how that compensation is calculated.  The actual service providers - physicians and other specialists - deserve to earn more than they do.  The current compensation system, and where it’s headed, is seemingly unsustainable.  I say that based on my own personal experience of having to pay Community Hospital $3,600.00 (after being initially billed almost $5,000.00) for a 35 minute MRI.  This is in contrast to paying a highly skilled eye surgeon who recently saved my eyesight less than $800.00 for a 90 minute surgery.  (Two unrelated procedures, to be clear).  Higher premiums and higher out-of-pocket exposure ($10,000 is very common these days) for average people with private insurance is simply unsustainable as earlier stated differently by Mr. Phillips.  One way that we can change things up - unless, of course, you are actually laying in the back of an ambulance en route to a local hospital - is to call Denver, Vail, Salt Lake, India, … wherever … in order to compare prices for commoditized hospital services.

Page 1 of 1




TOP JOBS
Search More Jobs





THE DAILY SENTINEL
734 S. Seventh St.
Grand Junction, CO 81501
970-242-5050; M-F 8:00 - 5:00
Editions
Subscribe to print edition
E-edition
Advertisers
eTear Sheets/ePayments
Information

© 2017 Grand Junction Media, Inc.
By using this site you agree to the Visitor Agreement and the Privacy Policy