Hospital Monopolies Matter

Study Finds Bangor Hospitals Charge Privately-Insured Patients Far More Than Medicare Patients, Competition Makes Portland Hospital Charges More Equitable

PORTLAND, ME – A ground-breaking study that used “big data” to compare how much hospitals charge their privately-insured patients compared to Medicare patients found Bangor hospitals charge patients covered by employer health plans far more than they charge Medicare patients for the same service.

Why do Bangor hospitals charge privately-insured patients so much? Because they are in a hospital monopoly, according to The New York Times report on hospitals in 306 metropolitan areas. The study the newspaper report used found Bangor charged Medicare patients “average” rates, but when it came to what it charged patients with private insurance, Bangor hospitals ranked 65th highest among the 306 metropolitan areas studied.

In contrast, Portland’s three hospitals charged their Medicare and privately-insured patients similar rates, according to the study that examined health claims from 30 percent of Americans who had some kind of employer-sponsored coverage. This is due to many factors, including having a higher proportion of privately-insured patients, but may also reflect greater competition within Portland and from Boston and other New England markets.

The study reviewed 92 billion health insurance claims from 88 million people covered by Aetna, Humana, and UnitedHealth and compared their charges to those billed to Medicare patients. Medicare places limits on what it pays for hospital services.

“These findings help make the case why we need the data to allow purchasers and consumers to compare healthcare costs and make informed decisions,” said Elizabeth Mitchell, president and chief executive officer of the Network for Regional Healthcare Improvement (NRHI) based in Portland, ME, “because to date that critical information has not been available.”

To create a transparent healthcare environment where purchasers and consumers can choose hospitals and providers based on the relative quality and cost of their care, NRHI has launched several initiatives across the country. Its members, called Regional Health Improvement Commissions (RHICs), collect private claims data for a specific region or state, similar to what this national study did but on a regional basis with more complete data on quality and cost.

NRHI wants to take that data collection a step farther and add patient-reported outcomes to the data mix so purchasers and patients have a robust analysis of the true quality and cost of care. NRHI hopes these regional efforts will be the grassroots model for a national movement that links payment rates to quality medical care.

But even a transparent and transformed healthcare delivery system will have limited ability to force hospital monopolies to charge equitable prices for all patients. “We are well on the way to price transparency in Maine with our coalition’s Total Cost of Care public reporting and the Maine Health Data Organization’s recent reporting on pricing, but that does not overcome the ability of consolidated provider systems to charge what they want because they hold dominant market positions. We need to move away from unit pricing altogether and towards new payment arrangements where large integrated systems are accountable for meeting quality and total cost goals for the populations they serve,” said Andrew Webber, president and CEO of the Maine Health Management Coalition, another of NRHI’s RHICs.

But without claims data and organizations like MHMC making it publicly available, purchasers like LL Bean, Bath Iron Works or the State of Maine would be in even weaker positions when it comes to negotiating health coverage. “Employers have known this for years, that Medicare’s relatively low costs come at the expense of private employers and consumers who pay far more for their healthcare,” said Mitchell.

“Ultimately, all stakeholders need transparent data- for informed purchasing, informed choice and for improved care,” Mitchell said. “This new study shows how hidden and impenetrable our healthcare system has been, and how valuable this data is to become more effective stewards of our healthcare resources.”

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Listen to the MPBN News story with Elizabeth Mitchell and Andy Webber here.

Contact Andrew Webber, president and CEO of the Maine Health Management Coalition, email: , phone: 207.844.8106 x 222

Contact Elizabeth Mitchell, NRHI President and CEO, email: , 207-747-5104 or (c) 207-239-7353