Hospital costs in Wisconsin are about 26% higher than in Illinois, according to a new study comparing the two states, but a hospital trade association questions the report’s methods and disputes its conclusions.
The reason for the difference isn’t certain, says the report’s co-author, University of Wisconsin economist Anthony Lo Sasso. But he says it could be because most metro areas in the state have one dominant hospital and healthcare system.
For hospitals, “it’s not a monopoly market, but it’s a consolidated market,” Lo Sasso said in an interview.
Illinois metro areas appear to have more evenly matched competing healthcare systems — in Chicago, but also in smaller communities around the state, he suggested.
Lo Sasso said the consolidation in Wisconsin appears to give hospital systems more power to negotiate smaller discounts with health insurance plans.
Lo Sasso is based at the UW-Madison La Follette School of Public Affairs. The report was produced jointly with Capital Policy Analytics in Washington, D.C., and was released by the Center for Research on the Wisconsin Economy at UW-Madison.
The report uses data hospitals and health insurers report to the federal government. Hospitals must report their charges for each service. Insurers must report the rates for each service that they’ve negotiated with hospital systems.
In both states, the report focuses on the rates paid by two health insurers, UnitedHealthcare and each state’s Blue Cross plan — Blue Cross Blue Shield of Illinois, and in Wisconsin, Anthem Blue Cross. Both United and Blue Cross have a substantial group of fixed, negotiated rates in both states, the report found.
While Wisconsin has “a handful of large, vertically integrated systems with extensive control over physician supply, service lines, and affiliated health plans,” the report states, Illinois “maintains a more competitive landscape.”
The Illinois sample included 67 hospitals throughout the state, while Wisconsin’s consisted of 58 hospitals. The study compared the charges for services in 26 billing codes that were found in both states.
“We use 26 high-volume procedures,” Lo Sasso said, that included heart surgery, maternity, orthopedic surgery and trauma procedures. He said the hospitals in the study were “highly representative of each state.”
The report states that Wisconsin hospitals’ 26% higher prices were consistent through a variety of analyses. In addition, at one hospital chain with operations in both Illinois and Wisconsin — Advocate Health, which is Advocate Aurora in Wisconsin — Wisconsin prices were 23% higher, the report found.
Christian Moran, senior vice president for finance and payment at the Wisconsin Hospital Association, said he didn’t believe the report adequately supported its conclusions.
The hospitals included were “not a representative sample,” accounting for less than half of all Wisconsin hospitals, he said. He also took issue with the use of two dozen billing codes when there are more than 700 codes to choose from.
“I just don’t believe it’s appropriate to draw conclusions based on that sample and without looking at the broad array of things that are driving healthcare costs,” Moran said.
Originally published on wisconsinexaminer.com, part of the BLOX Digital Content Exchange.
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