Health insurers for Indiana hospitals are paying 3 times what Medicare pays

A study has found that insurers in Indiana are paying three times what Medicare pays for the same services.

Indianapolis hospitals are overcharging health insurers, according to the study published last month by the International Journal of Health Economics and Management. The methodology and findings are being questioned by the hospitals, according to the IndyStar.

THE IMPACT

The payments resulted in high profit margins for central Indiana's major health systems, the study found.The study examined publicly available data on four major nonprofit health systems in Indiana to calculate their margins. It found each had margins of more than 10 percent and one had a margin of 20 percent. Most nonprofit hospitals operate at a margin between 2 and 3 percent.

THE TREND

The study by the Rand Corporation was done after an employer coalition in the state wanted to understand why their healthcare costs were increasing.

It found several factors unique to the state when analyzed against comparison markets.

In Indiana, the case mix index is higher than the U.S. average, based on study's findings of Medicare severity-diagnosis related groups coding by each hospital.

Indiana patients, in general, are sicker than in other markets, having a lower life expectancy and higher rates of obesity, heart disease and diabetes than the comparison markets.

Over 70 percent of Indiana physicians are employed by hospitals compared to the national average of 50 percent.

The study said adverse selection by Medicare Advantage plans could skew the numbers if the MA population is much healthier than those in traditional Medicare. It would leave the sicker patients in the fee-for-service Medicare, that was studied.

ON THE RECORD

"However, it is the excess payments from health plans that have enabled this situation to develop," the study said.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com