Cost-shift crisis: Colorado businesses, private payers disproportionately hit with rising hospital charges

Denver Business Journal
July 26, 2018

Private insurers are asked to pay sometimes seven times the cost of Medicare
for procedures. They could save tens of millions of dollars per year if they
could negotiate lower reimbursements.

Denver-area businesses that struggle with the rising cost of health care for
employees may need to take a long look at the amounts patients are being
charged by hospitals — and what can be sevenfold differences in what health
systems are asking private insurers and, by extension, businesses, to pay —
versus what those providers are accepting from government-funded health
plans for the same services and procedures.

A study released in June by the Denver-based Center for Improving Value in
Health Care and by the Colorado Business Group on Health found that the
cost of appendectomies, colonoscopies and similarly common services from
hospitals in 2016 to privately insured patients could be as much as 704
percent of the amount that Medicare will reimburse the facilities for similar
work. Reducing those payments even to two times the amount that Medicare
will reimburse could save payers in the Denver area more than $60 million.

But making such changes won’t be easy. Health insurers and care providers
have been working for nearly a decade to reduce the “cost shift” — the
practice by hospitals of charging more to privately insured patients, often
those whose health plans are funded by their workplaces — in order to
subsidize what they say are the lost costs of dealing with residents insured by
Medicare or Medicaid, neither of which repays the full cost of treatments. But
since the passage of a 2009 state law designed to balance those costs, the
burden on the privately insured has actually gotten worse, leaving employers
to pay more than twice as much as public-insurance programs for the same
procedures, according to Colorado Department of Health Care Policy and
Financing statistics.

This rise in financial burden to individuals and to employers who fund health-
insurance plans comes as health care spending in this state has risen 122.7

percent — or three times the rate of inflation — since 2000, according to a
report from the Colorado Commission on Affordable Health Care. Meanwhile,
household incomes are up only 22 percent since 2006, according to the
Colorado Business Group on Health.

Mark Carley, vice president of managed care and payer relations for Centura
Health, the largest health system in Colorado, suggested that the numbers
can be deceiving because the amount that hospitals list as their costs and the
amount they actually charge to insured patients after accounting for discounts
to their health-plan providers can be very different. Also, he and other hospital
officials say a comparison to Medicare is unfair, as the federally funded
system to insure seniors generally pays only 71 percent of the cost of the
procedures and services for which it claims to reimburse.

But in looking at the numbers rolled out by CIVHC and CBGH, Janet Pogar,
regional vice president for provider services for Anthem Blue Cross and Blue
Shield of Colorado, called them “very bothersome.” And Kim Bimestefer,
HCPF executive director, acknowledged that the continuing escalation of
health-care costs has gotten to be such a challenge for consumers, employers
and Medicaid that she is using her position in the government to bring
together health-care experts, payers, providers, pharmaceutical companies
and others to figure out options to slow this rise.

Bob Smith, CBGH executive director, thinks that it is up to business leaders to
rise up and use their collective power to demand that hospitals trim their
prices. Businesses have greater leverage than ever now with providers,
especially as an increasing number of large companies have moved to self-
insured plans, taking on the financial risk of health-care bills themselves.

Instead of pushing to attract Amazon’s second headquarters or to give tax
breaks to other corporations, Smith argued, local leaders need to say they will
not continue to reimburse hospitals at such exhaustive rates — and in doing
so, they will do more for the economy than any traditional job-creation
program could.

“I need the employers to start asking questions,” said Smith, whose
organization has served as an education and advocacy group for its business
members on health costs since its 1996 founding. “Health care is the biggest
economic development issue that we face. Why in the hell would you give
away a dollar in incentives in a [Taxpayer’s Bill of Rights] state when you
could reduce health payments and attract every employer in the country?”

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