Area hospital charges grow slower than national average

One health system accounts for 41 percent of total southeastern Wisconsin market burden

Southeastern Wisconsin hospitals have increased charges to commercial payers at a rate that is 50 percent less than the national average over the last 12 years, according to a study released Tuesday by the Greater Milwaukee Business Foundation on Health.

Findings were released during a meeting of providers, insurers, business and community leaders at the Westmoor Country Club in Brookfield.

This study updates previous studies released in 2009, 2011, 2012 and 2014.  All five studies examined the same factors – with the help of consulting firm, Milliman – and utilized the same methodologies to allow for a comparable analysis.

“The results of study included a couple of interesting departures from previous studies we have done,” said Ron Dix the Foundation’s executive director. “2014 was the first year since 2005 that the average southeast Wisconsin hospital commercial payment level increase was higher than the Hospital Component of the Consumer Price Index. Secondly, and maybe related, there was a significant increase in the governmental cost shift burden from 2013 to 2014 experienced by the area’s health systems, perhaps as a result of the implementation of the Affordable Care Act.”

The factors and highlights of the most recent study include:

Hospital Commercial Payment Comparison:

  • The average southeastern Wisconsin hospital commercial payment levels increased approximately 45 percent (3.4 percent annually) from 2003 through 2014. This increase was less than half of the 93 percent total increase nationally during the same period.
  • The only year where there was an exception was in 2014, when the average southeastern Wisconsin hospital commercial payment level increase of 6.5 percent was higher than the national increase of 5 percent.
  • The total increase in individual health system hospital commercial payments from 2003 through 2014 ranged from 18 percent to 80 percent. No area health system had an aggregate increase greater than the national average from 2003 through 2014.

Hospital Operating Costs:

  • For the years 2003 through 2014 the day-to-day expenses of running a hospital increased at a substantially lower rate the cost nationally. The study found that average southeast Wisconsin hospital per-unit operating costs increased 18 percent from 2003 through 2014 – approximately 1.5 percent annually. This compares with increases in the Hospital Producer Price Index (PPI) and the CMS Hospital Market Basket of 39 and 52 percent, respectively, from 2003 through 2014.

Hospital Cost Shift Burden Distribution:

  • The cost shift burdens (the difference between operating costs and payments including bad debts) from patients who are not covered by commercial insurance varied significantly among health systems – with one health system accounting for 41 percent of total southeastern Wisconsin market burden, while two other health systems accounted for only six percent each of the total market burden.

 Health System Commercial Market Concentration:

  • Earlier studies found the average level of commercial market share concentration (the relative market share of the predominant health system in each zip code) generally increased from 2004-2007 and then declined, beginning in 2008 and continuing through 2012.

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