Chicagoans will pay more for health care at the city’s most prestigious teaching hospitals as insurers move forward on a plan that links fees to consumers’ choices.
Under the plan, patients will be charged a higher co-pay if they select a hospital that has negotiated higher rates from the insurer–as teaching hospitals typically do. Co-pays could start at $100 per day for a community hospital such as Edward Hospital in Naperville, but possibly rise to $500 or more per day at teaching hospitals like Northwestern Memorial Hospital, Rush-Presbyterian-St Luke’s Medical Center or the University of Chicago Hospitals.
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Insurers say such “tiering” of hospital services will go a long way toward holding down health-care costs, by encouraging patients to choose less-expensive facilities in their networks. Teaching hospitals, because of their mission to train and educate future doctors, typically charge at least 30 percent more than a non-teaching peer.
Insurers say the concept, now being tested in select markets nationally, is not that unusual: Most health plans already charge a lower co-pay on generic drugs than for brand-name prescriptions. In Chicago, area residents could see elements of the new pricing plan later this summer when enrollment forms for 2003 are distributed, they add.
Not surprisingly, the plan has sparked sharp opposition from the teaching facilities, which say they would be unfairly penalized. They also say care could suffer if patients are forced to choose between cost and the benefits of receiving the latest research.
“We could be damaged by people just shopping for prices and not recognizing that there are differences . . . in what the procedures are,” said Dr. Thomas Dent, chief executive of Rush-Presbyterian-St. Luke’s Health Associates, which has 700 physicians affiliated with the West Side teaching hospital.
“Consumers . . . are going to be making choices, but it is not always clear that they know what they are choosing.”
Teaching hospitals fear that a higher co-payment could reduce admissions and revenue at a time when federal and state funding is being pinched. Teaching hospitals, typically located in the inner city, also tend to have a higher number of uninsured patients, further crimping earnings.
“Teaching hospitals are already skating on thin ice and losing money,” said Dr. Arnold Relman, former editor of the New England Journal of Medicine and professor at Harvard Medical School. “Any system of insurance that continues to weaken the teaching hospital by discouraging patients from going there is destructive to American health care.”
Indeed, the bigger question, such facilities say, is whether their roles as educators and researchers are valued–and whether bottom-line decisions should drive the debate.
“If, by doing this tiering, the insurance company has come up with a way to avoid paying their share of the cost of socially desired goods, then I have a policy objection to that,” says Michael Koetting, vice president for planning at the University of Chicago Hospitals.
Teaching hospitals acknowledge that there is overlap among services available at all hospitals, which raises costs, but administrators say community hospitals are not equipped to adequately treat certain highly specialized cases.
“If a place is good at [heart] bypasses, does that mean they are good at replacing valves?” Koetting asked.
Network pared
Insurers maintain that tiering inpatient hospital services allows health plans to provide patients greater access, without eliminating certain facilities from their networks. They also say the plans would affect all higher-cost hospitals, not just teaching facilities.
Cigna Corp., for example, said the high cost of patient care forced the insurer to pare 15 hospitals from its commercial HMO network this year in the Chicago area.
By tiering services, Cigna said, such a plan would at least allow patients to choose from a larger network of hospitals, although patients would pay more at more expensive facilities through higher co-pays.
After a certain number of days, co-pays would be capped to out-of-pocket maximums that can range between $2,500 and $5,000 a year, analysts and insurers say.
Cigna, which is considering launching a tiered hospital plan in Chicago by 2003, would not disclose specific co-payments it is considering offering to employers, but said the co-payments would still be a fraction of the daily inpatient care costs at area hospitals. In Chicago, the average cost for inpatient hospital care runs between $1,200 and $2,700 a day, depending on the facility, the insurer said.
“Consumers have really been shielded from what the actual cost of health care is,” said Dennis Matheis, president and general manager of Cigna’s Illinois subsidiary, which may test the concept for some of its 470,000 customers in the state next year.
“We have to get the consumer re-engaged in their purchasing decisions for health care,” Matheis said. “Consumers will become more savvy purchasers when there is a price differential in the decisions that they are making.”
Several other insurers are evaluating or discussing tiered plans with Chicago-area employers and medical-care providers.
Minneapolis-based UnitedHealth Group, which operates here as United HealthCare of Illinois Inc., is testing the tiering concept in Texas and several other undisclosed locations, while Louisville-based Humana Inc. has offered such a plan to its Kentucky employees.
Later this year, it plans to offer some Chicago-area self-insured companies tiered hospital services.
Employers interested
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Insurers acknowledge that the plan is controversial, but say there is enough interest from employers–who pay the bulk of employees’ health-care costs–that they plan to forge ahead.
Furthermore, insurers say they want to work with hospitals to develop ways to measure quality so that consumers have a better idea of what they are buying.
“This is a work in progress,” said Dr. Jack Lord, senior vice president and innovations officer at Humana.
A United HealthCare spokeswoman said the company will evaluate feedback from employers, consumers and medical-care providers in its test markets before it decides where else to launch tiered hospital services.
Some health-care providers are hoping consumer reaction will put a quick stop to the plan.
“American people just don’t like limits on their health care,” U. of C.’s Koetting said. “They are going to have a hard time with it in this market.