The Journal Gazette
Saturday, September 19, 2020 1:00 am

Study of hospital pricing disputed

Parkview says it has made changes

SHERRY SLATER | The Journal Gazette

The Rand Corp.'s new health care price study, released Friday, is either an accurate reflection of the local market – or an outdated snapshot.

It all depends on whom you ask – and where that provider places on the list of 178, with No. 1 being the most expensive on a relative basis.

Rand compared relative prices, which incorporate Medicare's adjustments for case mix, wages, inflation, medical education and volume of uncompensated care.

Hospitals charge more than Medicare pays because reimbursement rates are about 85% of the cost of providing care, according to the American Hospital Association. The Rand study, based on 2016-2018 data, found providers' prices range from 118% to 402% of Medicare rates. 

Parkview Health's billing rate for inpatient and outpatient services combined was 388%, the second highest in the study. 

Mike Packnett, Parkview's CEO, said it will take time for new, lower prices for outpatient testing and procedures to be reflected in Rand's report.

The nonprofit hospital system has renegotiated multiple payer contracts since last year's Rand report release, which provided Parkview officials with their first glimpse at other health care providers' rates. They lowered the costs of X-rays, lab tests, MRIs and CT scans, Packnett said.

One of Parkview's major renegotiated deals this year was with Anthem Blue Cross and Blue Shield. Anthem policyholders account for a substantial portion of northeast Indiana residents – about 250,000.

“We made some significant (price) adjustments as of Aug. 1,” Packnett said during a phone interview. “The Rand study, they're so narrowly focused and so dated.”

Packnett thinks Rand failed to adequately account for providers' quality and safety ratings. The study also didn't address the issue of total cost of care, he said. Michigan providers charge relatively low prices, for example, but tend to order more tests than are necessary, which leads to higher total costs, he said.

“How do we have the best care at the best cost? We can't get there just on price,” he said.

Among the steps Parkview is taking to cut health care costs is striking deals directly with employers, cutting out the insurance companies that often act as intermediaries.

Rand researchers found Community Health Systems, parent company of Lutheran Health Network, charged 260% of Medicare rates, placing the provider 83rd – or about middle of the list.

Mark Medley, CEO of Lutheran's network, said local prices are consistent with the parent company's percentage. 

Lutheran's network focuses on price and quality when it measures the value it offers patients and their employers, Medley said.

“We have to be part of that solution,” he said during a phone interview. “Pricing is one piece of a pretty complicated puzzle around all this.”

When Medley arrived at Lutheran in March 2019, the network's hospitals averaged 2.6 stars on the U.S. Centers for Medicare & Medicaid Services quality ratings. Five stars is the highest. In the latest ranking, Lutheran network's average was 3.5 stars, he said.

“That's considerable progress in a year,” Medley said, adding that physicians and staff deserve the credit. “I feel we bring the best value proposition to the table.”

Lutheran's network already offers some of the Rand report's cost-cutting suggestions, including narrow network coverage and contracts negotiated directly with employers, he said.

Indiana University Health's relative price was 327% of Medicare reimbursement rates, according to the new Rand report. Courtney Thomas, IU Health spokeswoman, emailed comments on the results.

The Indianapolis-based health care provider has three primary care and two urgent care offices here.

Thomas said IU Health has taken multiple steps to reduce costs. Those include “significant investments in lower-cost site of service alternatives such as urgent care, ambulatory service centers, telemedicine and home care services.”

Hospital pricing isn't the only factor in health care affordability.

“The entire cost of care – insurance, brokers, physician services, pharmaceuticals and others – should always be considered when defining the issue and developing solutions,” she said.

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