Study: Indy hospitals charge ‘excess’ prices

The Big 3 automakers spent 35 percent more in the Indianapolis area to provide health care for workers and non-elderly retirees than they did in other auto-heavy cities—and two-thirds of that difference can be blamed on “excess prices” by Indianapolis hospitals.

That’s the conclusion of an extensive analysis released this month by the Center for Studying Health System Change and the National Institute for Health Care Reform.

The findings of the study, released Feb. 15, show that General Motors Corp., Ford Motor Co. and Chrysler Group LLC paid an average of $7,900 per Indianapolis-area worker to cover health care expenses.

The average was $5,800 per worker in all 19 auto hubs considered in the study, which included Cleveland;, Detroit; St. Louis; Kokomo; Flint, Mich.; Youngstown, Ohio; and Buffalo, N.Y. Health care spending in Indianapolis was higher than all other regions except for Lake County, Ill.

Of the $2,100 difference between Indianapolis and its peers, roughly $1,400 was due to higher prices by hospitals. The rest could be blamed on the Indianapolis autoworkers being, on average, older and more heavily male than in the other cities.

“The study findings suggest that opportunities to control spending growth lie in restraining hospital prices and in improving people’s health status,” wrote study author Chapin White, a senior researcher at the Center for Studying Health System Change, a not-for-profit based in Washington, D.C.

Because the benefits for autoworkers and retirees (who are not yet eligible for Medicare) were all negotiated by the United Autoworkers Union, the richness of benefits was uniform in all cities, White noted.

White’s study was based on 2009 data from the private health insurance plans—mostly Blue Cross and Blue Shield—that helped administer the autoworker benefits, which are paid for by the auto companies themselves. Those data were collected by the market research firm Thomson Reuters.

Indianapolis-area autoworkers consumed 12 percent more in health care services than their peers in the 18 other auto hubs. That was mostly due their age and sex.

When White adjusted the autoworkers’ health care spending for those two factors, the Indianapolis workers had slightly better health than their peers in the other cities.

So the quantity of services in Indianapolis, when adjusted for age, sex and health status, was actually 4 percent less than the average in the other cities. This finding suggested that doctors and hospitals are not prescribing unneeded tests and procedures—at least no more so than their peers in the other cities.

But the big difference came on the price side. Even though it costs 3 percent less to operate health care businesses in Indianapolis than the 18 others cities, prices here were 22 percent higher.

When total prices and cost of doing business were combined, Indianapolis was the most expensive city in the study—with prices 26 percent higher than the average.

The blame for higher prices in Indianapolis rests almost entirely with hospitals, White’s study showed. He made this conclusion after comparing prices paid by the auto companies—through the Blue Cross and Blue Shield plans—against the prices paid by Medicare, the federal health plan for seniors.

Whereas Indianapolis-area physicians charged prices 4 percent higher than Medicare, hospital inpatient prices here were 78 percent higher and hospital ER prices were 200 percent higher than Medicare.

White tried to correlate prices with the health care wages, hospital quality scores or market concentration in each region, but found no clear explanation for the differences from one city to the next. In Indianapolis, hospitals paid slightly lower wages than their peers in other cities and posted somewhat better quality scores.

But market concentration in Indianapolis was actually lower—meaning the market should have been more competitive—than in the 18 other cities.

“Together, these findings suggest that the ability of hospitals to command high prices rests on factors that are not easily discernible in quantitative measures of quality or market concentration,” White wrote. But the prices in some communities, he added, “are clearly out of line.”