Conflict between hospital systems and insurers is all too common in healthcare today. In the New York metropolitan area, the failure of the Mt. Sinai system and UnitedHealthcare to negotiate a contract is a particularly sad state of affairs for many affected patients and their doctors. 

Today’s video was taped months ago and reports on an uncommon type of conflict in healthcare and an unusually bitter conflict between an Indiana association representing employers and Indiana hospitals over the cost of hospital care. Although the high cost of drugs gets so much attention in the U.S., the fact is that hospital costs receive the largest share of the premium dollar. 

Even though employers are burdened by the high cost of healthcare, there is typically a more genteel relationship between employers and their local hospitals than what is described in “Employers Wage Battle Over Healthcare Costs,” a cover page story in the Wall Street Journal on September 29, 2023. 

You are likely better off reading this copy than watching my, in retrospect, too lengthy video. I had difficulty with this topic. Clearly, the root cause of the unusual behavior described below is the exasperating cost of healthcare. The Kaiser Family Foundation reports that the average cost of healthcare coverage for a family of four is now $24,000 a year and employers bear the brunt of supporting the system. Yet given my background, I understand the issues from the hospital and health plan as well as the employer perspectives. And the issues are vexing.

Background

After the Employers Forum of Indiana retained consultants to study hospital charges, Indiana employers came to believe that they were paying among the highest charges in the country to their local hospitals and hospital systems. The resulting reaction was rage: rage at the fact they were paying such high prices and rage directed at a system where lack of information allows employers to be uninformed regarding how much they are paying for healthcare. After all, Indiana is not a high-cost state based on any reasonable measure. 

Employers took action in unprecedented ways. They set up a lobbying group, Hoosiers for Affordable Healthcare. That group used technology to place ads on the phones of people visiting the hospital which displayed hospital profit margins and investment portfolios. When the group introduced legislation aimed at taming hospital cost increases, they hired trucks to circle the Capitol with billboards identifying hospital systems and their profit margins including signage that stated, “Hoosiers pay twice as much for hospital care as neighboring states like Michigan.”

This statement resulted from benchmarked hospital prices versus Medicare rates as shown in the article. It is difficult to understand why Michigan’s hospital prices are so much lower than Indiana’s relative to Medicare rates. 

The new law takes effect next year and requires hospitals to submit detailed pricing information to the state which will be reviewed and presumably made very public. It’s too bad that this is necessary but employers pay a large part of the healthcare bill and deserve to know. This level of conflict with local hospitals is very rare but it does appear that many hospitals got carried away with pricing decisions. Let’s hope for a calmer future for all.