The Journal Gazette
Sunday, March 01, 2020 1:00 am

Insurer pushes Parkview on costs

Says charges too high, citing study hospital calls unfair

SHERRY SLATER | The Journal Gazette

Anthem Blue Cross and Blue Shield is pressuring Parkview Health to lower prices after a study found the local health care provider is the most expensive in the state.

The Indianapolis-based health care insurer is relying on data gathered last year by the nonprofit RAND Corp. to accuse Parkview of charging patients four times what the federal government pays for the same care.

Parkview officials are pushing back, saying the report's methodology was unfair. Comparing other data found in the same study, Parkview's prices were actually lower than those of Indiana University Health, they say.

The report's authors agree the numbers can be crunched in numerous ways. They confirmed to The Journal Gazette last week that Parkview's prices are lower than IU Health for in-patient care.

But when out-patient care is factored in, the two are “in a dead heat” for the most expensive health care in Indiana, according to an employers' organization. That's bad news for anyone hoping that IU Health's entry into the northeast Indiana market would drive health care prices lower by increasing competition. 

IU Health-Fort Wayne's local presence includes primary care and an urgent care clinic, but the provider has acquired 137 acres on Airport Expressway at Interstate 69, paving the way for a new hospital.

Officials haven't confirmed plans to build a local hospital but said in December their goal is to provide the full spectrum of services locally.

Contract negotiations

Anthem and Parkview are locked in negotiations to extend their contract, which expires April 29. Both sides say there's a possibility the existing deal won't be renewed.

In the near term, Parkview patients with Anthem insurance could find themselves suddenly paying more for care – or forced to switch providers as of April 30. That might be easier said than done. For residents in some smaller northeast Indiana communities, the only hospital in the county is owned and operated by Parkview Health.

Each side has significant bargaining power. Parkview is northeast Indiana's largest health care provider and largest employer. Anthem has the largest membership among any health care insurer doing business in Indiana.

Without a contract, thousands of northeast Indiana residents would have to pay out-of-network rates to see Parkview physicians or receive care in Parkview-owned hospitals, surgery centers and clinics. Anthem spokesman Tony Felts declined to provide an exact number.

How much more than in-network rates varies by employer, Felts said.

Anthem's negotiating strategy centers on study results released last year by the RAND Corp.

The nonprofit, nonpartisan research organization conducted the study after being contacted by Employers' Forum of Indiana, whose members believed health care prices were higher in Indiana than in other states. 

A grant from The Robert Wood Johnson Foundation, a nonprofit that supports health-related research and programs, paid for the study.  

Employers' Forum of Indiana, which is managed by a for-profit firm, was created in 2001 specifically to study health care costs and ways to increase value. The organization is in the process of becoming a nonprofit, President and CEO Gloria Sachdev said in an email.

Forum members include providers IU Health, St. Vincent's Health and Community Health Network; insurance companies Anthem, Encore Health Network and UnitedHealthcare; and insurance brokerage Hylant, according to the organization's website.

Indiana University, Purdue University and the University of Notre Dame are also on that list, as is major local employer Fort Wayne Community Schools Corp. Parkview isn't.

Although employers and insurance companies are trying to leverage the report to force health care providers to lower prices, they didn't influence results of the study that looked at providers in 25 states, a RAND researcher said.

Question of fairness

The RAND report's headline was that Parkview charged insurance companies about four times as much as Medicare reimbursement rates. That compared with a nationwide average rate of 2.4 times federal reimbursement rates.

Everyone agrees the Centers for Medicare and Medicaid payments don't cover the full cost of medical care. Providers have to make up the shortfall by charging insurance companies more than federal reimbursement rates.

The question is: How much is too much? Anthem contends Parkview's rates are too high.

“The businesses and consumers we serve in northeast Indiana have expressed their concerns about increases in the cost of health care, and we take those concerns very seriously as we work to negotiate a fair contract that protects affordability,” Felts said in an emailed statement.

Based on RAND's findings and Anthem's own claims data, the Indianapolis-based insurance company is pushing Parkview to lower its prices. There are no active negotiations between Anthem and IU Health.

“They want a significant decrease in our pricing,” said Mike Packnett, Parkview's CEO.

But Packnett is pushing back. He has a problem with the RAND report's methodology for several reasons, including how researchers crunched the numbers. They calculated the percentage each hospital charges over federal in-patient reimbursement based on that hospital's Medicare base rate.

But there isn't a flat base rate. It varies, with teaching hospitals receiving considerably more than non-teaching hospitals.

For Parkview, that base is $6,700 per average in-patient stay. Indiana University Health, which is affiliated with IU's medical school, receives a Medicare base rate of $13,562 – or more than twice what Parkview receives.

If Parkview and IU Health both charged $27,000 for the same treatment, for example, IU Health's price would be labeled twice Medicare reimbursement rates while Parkview's price would be calculated as four times Medicare, using RAND's methodology.

Packnett doesn't think that's fair.

Balancing out

Dr. Greg Johnson, Parkview's chief clinical integration officer, described RAND's approach as a “selective use of the data.”

The experts don't dispute that.

David Kelleher, Employers' Forum of Indiana's president of health care options, acknowledged pricing can be assessed in various ways. Parkview's method of slicing the numbers is another valid way, he said.

Parkview's prices for in-patient care are actually lower than IU Health's, according to the data.

But, Kelleher said, more than half of total health care payments made by employers and insurance companies are for outpatient services, which aren't reflected in the rates cited above. Looking at that data, he said, “Parkview's prices are substantially higher than (IU Health's).”

Even so, the differences substantially balance out. Parkview's in-patient prices are about 13% lower than IU Health while its outpatient prices are about 12% higher, Kelleher said.

“As a result, they are in a dead heat for the most expensive in the state,” he added.

Brian Bauer, president of Indiana University Health-Fort Wayne, addressed cost in a statement that included an overview of the provider's growth since entering the market in August 2018.

That expansion has included hiring more than 20 primary care physicians and forming partnerships with more than 10 surgical specialties.

“We are working closely and in partnership with employers and community leaders in northeast Indiana to ensure the high-quality services we offer will also lower the cost of care in our region,” he said Friday in an email.

Christopher Whaley, a RAND policy researcher based in Santa Monica, California, confirmed that Parkview and IU Health's prices at the time of the study were on par with each other. RAND plans to release an updated report in May.

Another finding from last year's study was the absence of a clear link between price and quality, Whaley said.

Packnett contends that Parkview's care is of such high quality that it creates significant value. He is frustrated that the RAND report looks at price only.

Parkview invests in initiatives that lower costs for patients and payers, even when those efforts result in less revenue for the health care system, Johnson said. That includes encouraging patients to seek care at walk-in clinics instead of the emergency room even though Parkview is paid substantially more for ER visits.

Parkview also includes employing nurse navigators to help patients manage chronic conditions, including diabetes, he said.

Johnson and Packnett said those factors have to be weighed when judging Parkview's performance.

Whaley rejects the idea that RAND has put too much emphasis on price.

“If we're going to have a conversation about value,” but ignore prices, he said, “that doesn't feel like a very honest conversation.”

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