Hospital association contests Ball State monopoly study

The Indiana Hospital Association is disputing a Ball State University study of Hoosier hospitals that blames part of the high cost of health care on monopolies.

Brian Tabor, president of the IHA, criticized the core methodology used in the Ball State study, saying the central thesis is based on skewed information.

The IHA commissioned an analysis conducted by National Economic Research Associates, or NERA, of White Plains, New York. NERA used census and hospital data that concluded that Indiana hospitals don’t have a monopoly problem.

“The analysis shows that such a monopoly problem does not exist in Indiana and the way in which (Ball State) conducted this study simply does not make sense,” Tabor said.

The study by Michael Hicks, director of Ball State’s Center for Business and Economic Research, concludes that Hoosiers are paying on average $819 more on health care than other Americans even though the state has been falling in national ranks for health outcomes. He said one of the causes was hospital monopolies.

Hicks proposed returning competition to not-for-profit markets, taxing not-for-profits that earn profits at a rate consistent with the private sector, and returning revenue to health and education services.

The NERA study rejected those recommendations, saying its analysis showed that Indiana doesn’t have a monopoly problem.

“Indiana appears comparable to the rest of the United States, and where Indiana hospitals are more concentrated, our findings suggest that these few instances should not raise new concerns related to competition,” NERA wrote.

The recommendations in the Ball State analysis could have the opposite effect and drive up costs, the report concluded.

Another area of criticism addresses the profit margins reported in the Ball State study. Tabor noted that most of the profit margins do not take into account the debt some hospitals have taken on because they are operating in small rural areas.

Tabor said Hicks relied on the 990 tax forms that not-for-profits file with the Internal Revenue Service rather than the audited financial statements that provide more detail about hospital profit and expenses.

Hicks explained that he used the IRS 990s because they are specifically designed to show whether not-for-profit organizations are behaving like not-for-profits.

Tabor specifically disputed the data used in reporting that Parkview Wabash Hospital had a 49 percent profit margin and said the hospital had lost money on operations several years in a row.

“The profit that is alleged here is actually not a profit at all,” Tabor said. “The value of that hospital, this is simply an accounting measure, as a building was recorded on the tax forms that Dr. Hicks used.”

Tabor said the hospital had been independent and survived by becoming part of the Parkview system.

Tabor acknowledged the Indiana’s rankings for health outcomes aren’t as good as they should be but attributed that to a range of factors, including high rates of smoking and obesity.

Hicks stood by his conclusions.

“Prices in Indiana for consumers are much higher than they should be, and higher prices occur in places where there is less competition,” Hicks said. “There is no reason why other factors like smoking rates or obesity rates or diabetes rates would happen to be specifically in places that have less hospital competition.”