Prices across dozens of hospitals in Wisconsin were “consistently and substantially higher” than prices for the same services in Illinois, a report from a UW-Madison think tank found.
The Center for Research on the Wisconsin Economy recently issued a report comparing prices between 70 hospitals in Illinois and 60 in Wisconsin based on commercial negotiated-rate data.
It covers dozens of health systems, assessing “high-spend” inpatient services for UnitedHealthcare and the “Blue plan,” Anthem Blue Cross in Wisconsin.
Authors found hospital prices in Wisconsin are about 26% higher than in Illinois, noting the finding “holds under multiple analytic approaches.” This suggests the difference isn’t driven by differences in the mix of patients, services or insurers, or by hospital type, the report found.
“Within the Advocate Health system, which operates on both sides of the border under common ownership, Wisconsin hospitals are still paid about 23 percent more than their Illinois counterparts,” authors wrote. “And the premium is strikingly uniform across the Blue plan and UnitedHealthcare, which independently land within half a percentage point of each other for inpatient care.”
Meanwhile, the Wisconsin Hospital Association is criticizing the report, noting the lack of citations and data to back up findings “makes it impossible to verify” the authors’ claims.
“A study that ignores entire groups of hospitals, does not identify the hospitals included in its sample, disregards entire categories of procedures, and compares prices using only two group health plans that have a combined 90.1% market share in Illinois compared to 22.6% in Wisconsin has obvious flaws,” the group said in an emailed statement.
The report points to structural differences as an explanation for the trend authors found, including provider market concentration, system-level consolidation and the “strategic positioning” of major health systems in the state. It points to the widespread use of “percent-of-change” contracting in Wisconsin as particularly important.
Under this model, a hospital is paid a fixed share of its billed charges, rather than a pre-set dollar amount. This results in the effective price being linked to a price database that “the hospital sets unilaterally and can raise over time,” authors wrote.
It’s much more widely used in Wisconsin than in Illinois, per the report.
“The concentration of such contracts in Wisconsin is consistent with the strong provider bargaining position that a consolidated hospital market confers; and because these contracts give hospitals a standing mechanism to raise realized prices, they may help entrench the very premium this report documents,” authors wrote.
The report was authored by Prof. Anthony T. Lo Sasso, a member of UW-Madison’s La Follette School of Public Affairs, and Ike Brannon, president of the consulting firm Capital Policy Analytics.
