Highmark again disputes heart surgery cost report
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Dominant insurer Highmark Inc. reiterated its concerns yesterday about a recent report revealing wide disparities in the amounts paid for local cardiac surgeries, telling the state Senate Banking and Insurance Committee that hospital-by-hospital negotiations "inevitably produce payment differences" and cautioning consumers not to make conclusions about pricing based on a limited sample of medical cases.
The comparisons in question are from the Pennsylvania Health Care Cost Containment Council, which released a report on June 14 showing that during 2005, UPMC Presbyterian and UPMC Shadyside received an average of $34,803 for coronary artery bypass graft surgery -- used on patients with significant artery blockage. The average payment for the same procedure at West Penn Hospital in Bloomfield was $25,184, while at Jefferson Regional Medical Center in Jefferson Hills, the payment was even lower: $18,009.
"Some differences in hospital payments from commercial insurance companies have existed for many years," said Sandra Tomlinson, Highmark's senior vice president of provider services. There is "no single formula or industry standard" that hospitals use to set payment targets; instead, the targets vary according to nine different factors listed by Ms. Tomlinson -- ranging from a hospital's dependence on Medicare to its complexity of cases to the level of nearby competition to the hospital's location in a rural, suburban or urban area (sometimes rural hospitals need even more money to attract the best physicians).
But two state senators in Oakland yesterday for a hearing on the payment disparities aired their doubts about Highmark's testimony.
"I just don't buy it," said state Sen. Mary Jo White, R-Venango, disagreeing that the factors listed by Highmark "account for such huge differences." Later she said it "appears" there was overpayment for cardiac procedures with "no significant differences in quality."
"What's going on?"
How insurers and providers arrive at their rates "is very difficult to understand," Ms. Tomlinson said.
Highmark Senior Vice President Darren Macioce argued that the council's report lacked a severity-of-case adjustment and thus did not account for a "wide variation" in complexity and "disease burden" of people who had the procedures. As a result, he said, the payments listed in the report are not adjusted appropriately.
Sen. Don White, R-Indiana, asked the Highmark officials if anyone at the insurer sat on the boards of area hospitals (Highmark promised to get back to him with that answer) and asked about claims from the West Penn Allegheny Health System that Highmark provides favorable reimbursement rates to the 19-hospital University of Pittsburgh Medical Center, which Sen. White referred to yesterday as a "cartel."
"All I know is UPMC has a most-favored nation relationship with Highmark," the senator said.
Ms. Tomlinson of Highmark disputed that suggestion, noting that the 2002 insurance contract signed with UPMC was reviewed by the Pennsylvania Insurance Department and "there is no favored-nation provision included in that agreement." In prepared remarks delivered earlier, she emphasized that Highmark does not have "the upper hand" in negotiations with health systems in Western Pennsylvania, contrary to what some might believe.
The senators, despite their reservations, appeared encouraged by Highmark's willingness to work with the cost containment council. Highmark, in fact, is part of a Payment Data Advisory Group convened this summer to address data reporting issues so future reports will be "more meaningful," Ms. Tomlinson said.
Cost containment council director Marc Volavka, in written remarks provided to the council, acknowledged that the numbers are "being challenged" as "erroneous or misleading" and some hospitals "may have a point in some cases. This isn't an exact science."
The study, he said during his testimony, "is by no means perfect, but this type of information, when used as one tool among many, can help all of us look at the rising cost of healthcare in a new, and more focused, light."
First Published August 31, 2007 12:00 am
