A new national study finds that Bangor hospitals charge privately insured patients substantially more than Medicare patients. While much of health care reform addresses quality, advocates say the study underscores the need to focus on another area of health care reform — cost.
According to the study, called the Health Care Pricing Project, there has been a general assumption that spending for Medicare patients translates into spending for other patients. In other words, if a particular region has low Medicare spending, then the costs are also low for privately insured patients.
But the results of the study show there can actually be wide variation.
"My initial reaction was finally the evidence is catching up with the practice that we have known about for decades," says Elizabeth Mitchell, CEO of the Network for Regional Healthcare Improvement in Portland. "While some regions are lauded for low cost, if you only look at the Medicare data, you often miss the fact that those are some of the highest-cost regions for commercial payers. So employers like L.L. Bean and Bath Iron Works and Jackson Laboratories are paying more, in some cases, because Medicare rates are low."
The study found that in Bangor hospitals, spending on Medicare patients is average. But spending in the same hospitals by those with private insurance is relatively high — the 65th highest of 306 hospital regions.
The range in spending between Medicare and privately insured patients is narrower in Portland — about average for both, according to the study.
Andy Webber of the Maine Health Management Coalition says greater regional competition may drive Portland's lower costs, whereas Bangor is more isolated and the mix of patients is different.
"As you move farther north, the case mix for the hospitals in Bangor include more poor people and more elderly people and less people that are privately insured," he says.
Which can drive up prices for those with private insurance. The chief communications officer for Eastern Maine Healthcare Systems, Suzanne Spruce, says commercial insurers do pay more than government payers. But, she says, "out-of-pocket payment by subscribers is driven by the plans they choose, and many people do opt for the high deductible plans."
In addition, Spruce says, EMHS maintains uniform charge structures.
"Payments, however, do not correspond to those charges," she says. "What a hospital typically receives in payment for the care delivered can be very different from the charge."
Regardless of the factors that lead to higher costs for those with private insurance, Webber says there are ways to keep them under control, such as paying based on population.
"That would say, here's the population I'm going to serve, and now let's negotiate a total cost goal and quality goals," he says.
Which, Webber says, encourages health providers to pull unnecessary costs from the system. This type of bundled payment is being tested in various areas in the U.S.
In the meantime, Mitchell says ensuring price transparency is critical to limiting health care spending.
"We have tolerated an opaque system for far too long, and it is increasingly recognized as being unsustainable," she says. "It will literally bankrupt the economy if we don't get better control of our health care spending."
Mitchell - who used to head up the Maine Health Management Coalition - says the organization provides data on health care quality and prices, and that employers and providers should use that information to negotiate fair health care coverage.
