Data: Hospital-owned clinics charge more
By Charles Rathmann, of SBT
Health care provided by clinics associated with hospital groups in southeastern Wisconsin is significantly more expensive than care provided by clinics with no hospital affiliations, according to data gathered by Independent Physicians Network (IPN).
The Milwaukee-based group coordinates care for patients on behalf of health plans.
The cost data covers a variety of health care institutions and also reflects actual payments made by public insurers such as Medicare and Medicaid, as well as by private insurers.
The data compares the costs of providing care in hospital-owned facilities with the costs of care in freestanding clinics in the region during 2002.
Most available health care data, including information collected by the State of Wisconsin Department of Health and Family Services, reflects only published rates. Just as a manufacturer’s suggested retail price might not reflect what consumers pay for a new car, insurers negotiate discounts on the standard rates for clinical and hospital care.
Figures on what is actually paid for care are protected by confidentiality agreements. However, according to IPN chief executive officer Charlette Heyer, the group, which includes 1,000 physicians in southeastern Wisconsin, is still able to break down cost figures by type of institution.
According to the figures released by Heyer’s organization, payments made for the same procedures can cost almost four times as much in a hospital-owned clinic than in a freestanding clinic.
While figures compiled for release do not encompass every condition or procedure, figures released in previous years covering a variety of different medical procedures exhibit a consistent pattern of higher costs at hospitals and hospital-based clinics.
Industry insiders point to a variety of reasons for the significant disparity, including the greater leverage major hospital groups have in negotiating compensation from insurers and higher overhead.
"Yes, hospital-based services have higher prices than clinic-based," St. Joseph Regional Medical Center chief operating officer Rick Hart said. "MRI, for example. In a clinic, you will treat outpatients who arrive on time and only during business hours and who may have very special types of testing. In a hospital setting, you may need to have 24-hour call, seven-days-per-week service. You need to treat patients who are unconscious, who need IVs, etc. Many will be inpatients for whom no extra payment is given, so the payment from outpatients may need to be subsidized."
Health care consultant Sara Stanton of Waukesha-based Stanton Healthcare Management said the limited scope of the data makes it difficult to make conclusions, but she agreed with Hart that the different overhead structures are a factor in care costs.
"Hospitals and managed care agree on prices for services," Stanton said. "Volume of patients is a determinant in those discussions also."
Dr. Susan Turney, medical director of patient financial services for the Marshfield Clinic, offered an outsider’s view of the data. The northern Wisconsin entity is the largest private group medical practice in Wisconsin, with 591 physicians and 4,365 other employees. The group does not serve the southeast Wisconsin market.
Turney, who serves on the board of directors for the Wisconsin Medical Society, said the selection of procedures and services covered in the data released by IPN may reflect a bias.
"Obviously, by presenting this data, they are trying to make some sort of point," Turney said. "It is very difficult just seeing this sheet alone. It is hard to compare costs when they are provided at different types of facilities."
Turney stressed that hospitals and clinics bill very differently for their services, and often, historical relationships with insurance organizations can influence payments made for various procedures and services.
"The billing mechanisms and the payment mechanisms vary by the site," Turney said.
According to Heyer, the figures reflect all payments, including facilities charges. Hospitals have a greater degree of leeway in determining what to bill for services, according to Heyer.
"For a physician, you can only bill for what services that are performed," Turney said. "With hospital billing, a lot is already bundled into the payment mechanism. At a physician’s office, I am not going to bill you for an ACE wrap and a bandage and taking your blood pressure – that is all part of the office visit. In a hospital, they still have the opportunity to recover some of their cost by billing for other, extraneous things."
According to the IPN data, payments to hospitals have not come down as hospital groups have gained the ability to perform basic procedures in a clinic environment.
"Some of the cost is based on historical precedent," Turney said. "Care has transitioned from an inpatient to an outpatient setting. We know that many people have cataract surgery used to be a week in the hospital. They now go through the procedure and are released same day. There is a lot more cost with an inpatient stay."
According to Turney, reimbursement levels have in some cases not dropped to reflect the lower costs of procedures.
April 18, 2003 Small Business Times, Milwaukee