Reading The Tea Leaves, Part 1


About 10 years ago, a series of stories in the Milwaukee Journal Sentinel, among other places, noted that health care costs in southeastern Wisconsin were up to 55% higher than the average for the Midwest.  Several factors were felt to be responsible: high hospital and physician rates, in part due to less consolidation in the insurance business; and greater utilization (older population, less cost-sharing and more generous plans).  In addition to intense publicity, large local employers banded together to form the Business Health Care Group as a way to increase payers’ bargaining power.

So what’s happened since then?  A recent MJS article notes that the differential between SE Wisconsin and the rest of the region as shrunk to 7%, due in large part to much lower than average increases in hospital costs and utilization rates that are now consistent with, or lower than, average.  That would seem to be good news.

The bad news?  With health care costs continuing to rise faster than overall inflation, the focus is now on payments to providers, which remain substantially above the Midwest average: 191% of Medicare here vs. 158% as the Midwest average.  (As most of you know, MCW is a good bit above the SE Wisconsin average.)

We have justified our higher than average charges in part because of our academic mission, and in part as a way of making up for the fact that approximately half of our patients are on Medicaid, which pays below the cost of providing care in many cases.  A survey showed that the majority (78%) of respondents  were unwilling to pay more for access to an academic medical center; of those who were willing to pay more, the median premium was 10%.  As far as cost-shifting to cover Medicaid, there is some willingness among payers to accept such a need, but not to the extent we have done so in the past.  In short, we are not going to be able to continue to command the very high provider rates we have in the past.  The tea leaves are clear.  The fat lady has sung.

Concerning?  Of course.  But let’s not allow ourselves to be victims.  We may not be able to control our environment, but we can certainly control our response.   Time to move up to the higher rungs of the accountability ladder and determine what we’re going to do about it.

One Response to Reading The Tea Leaves, Part 1

  1. Todd Gudausky, MD says:

    Marc you really hit the nail on the head with this piece. Hopefully you will be in a position to comment on “our response” in your upcoming pieces.

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