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New Report Calculates High Hospital Costs for Employers

A new report suggests pooling resources for expensive high-tech services, such as heart surgery, could improve performance and reduce costs. (AndyG/Flickr)
A new report suggests pooling resources for expensive high-tech services, such as heart surgery, could improve performance and reduce costs. (AndyG/Flickr)
July 23, 2019

LAKEWOOD, Colo. — Commercial insurance plans pay Colorado hospitals, on average, almost three times what Medicare pays for the same care. A hospital in Fort Morgan charges nearly eight times more than Medicare reimbursements. That's according to a new Hospital Value report on pricing and performance.

Bob Smith, executive director at the Colorado Business Group on Health, one of the groups behind the report, said current incentives in place have boosted stock values, but the marketplace is not working for firefighters and school districts who have been hit with rising costs.

"Colorado hospital net profit is four to five times the average hospital in the country. Insurers have seen their earnings per share go up anywhere from 300% to 1,000% in the last decade,” Smith said. “The system works really well for them."

The report found performance outcomes vary as much between as within hospitals, and Smith said there seems to be no reliable correlation between price and quality of care.

Hospital administrators have long argued higher costs are passed along to commercial plans to help make up for what they believe are insufficient Medicare and Medicaid reimbursements. Hospitals also charge more to cover the costs of treating people who can't afford to pay.

Smith pointed to annual reports by an independent commission to Congress showing efficient hospitals can break even on Medicare. But, he said excessive payments in the commercial market negate the need for hospitals to be efficient and control costs.

Smith said the impact on consumers is significant. Twelve years ago, Jefferson County teachers earning $50,000 a year paid less than 5% of their salary for health care.

"Today, if you make $50,000 as a teacher - which is still well above the starting teacher salary - you have to pay a quarter of your salary for family health care,” he said.

Smith said the report's recommendations are in sync with Gov. Jared Polis' plans for reducing health-care costs, and include efficiencies such as getting hospitals to join forces for high-cost care, and getting insurers to adopt uniform payment systems. The report was released July 23 by Smith's group and the Colorado Consumer Health Initiative.

Eric Galatas, Public News Service - CO