Sunday, April 02, 2006

More Smoke. There's a Fire Someplace

One of the state's largest insurers says Aurora Health Care Inc.'s longstanding dominance of the Milwaukee hospital market is driving up health-insurance premiums throughout eastern Wisconsin.

Wisconsin Physicians Service Insurance Corp. has filed a broad antitrust lawsuit challenging Aurora's hardball negotiating tactics that require health insurers to include all of its hospitals and doctors in every health plan they sell.

The tactics have prevented large insurers in eastern Wisconsin from offering less costly health plans, particularly those designed for small employers and individuals, the lawsuit contends. WPS also blames Aurora for the Milwaukee market having the highest hospital costs of any metro area its size in the country.

Little question that Aurora has muscled its way around before; and WPS has a point. Of course, when you drive throughout SE Wisconsin, you notice that Aurora is putting up (expensive) new facilities everywhere.

Unlike other health care systems, Aurora has 13 hospitals and more than 100 clinics stretching from Kenosha to Green Bay. It also has expanded aggressively, building hospitals in new markets such as Green Bay and Oshkosh.

There's a cost to that:

WPS' allegations also could undercut Aurora's contention that its expansion into new markets, such as its determined push to build a hospital in western Waukesha County, increases competition.

If health plans are automatically required to include every new Aurora hospital in their networks, Aurora presumably would have little incentive to offer lower prices in new markets such as Waukesha.

But there's ANOTHER cost:

The new hospitals come at a price, saddling Aurora with a heavy debt load and a lower bond rating. That in turn has required Aurora to pay higher interest rates.

"To service that debt, they've had to load their prices," Blomquist said.

Further, Aurora often incurs heavy losses when it opens a new hospital.Despite its size, Aurora is far less profitable than many of its competitors. In 2004, it posted a net profit of $31.8 million - 1.2% of its $2.6 billion in revenue.

Not to mention Aurora's willingness to spend beaucoup millions on lawyers, PR firms, Advertising, and the salary of their CEO...


thetruth said...

Your take on the contract dispute between Aurora Health Care and Wisconsin Physician’s Service Insurance Corp. is missing some key facts. Your posting is based on unsubstantiated accusations made by WPS in a countersuit – accusations that just aren’t true. WPS was sued after it continually tried to break its contract with Aurora – a contract that gives people the ability to access all Aurora facilities and services.

That full access is at the heart of Aurora’s integrated approach to health care. It helps ensure consistent care for a person at all stages of life. That approach is better for patients and holds down costs – contrary to what WPS is saying.

Another important point -- health care is no different from any other business when it comes to competition. Here is what Edward J. Novinski, Senior Vice President of UnitedHealthcare, one of the largest health insurance companies in the state and nation, said about competition during a public hearing last year:

“As we all know, health care is not solely about costs and prices, but more importantly, it is the health and well-being of your citizens. Competition not only rationalizes prices and costs, but also rewards innovation, supports innovations in quality, continuous improvement in customer and patient service levels and accessibility for a growing and diverse population.

“I would like to add that if I were to attend a similar hearing in a different market in the United States or this market with different circumstances, my comments would be exactly the same. Competition works in health care just like any other American innovation or business.

“A lack of competition stifles continuous performance improvement, quality improvement, price competition and service levels. Most severely, it impacts your citizens' ability to have service choices at a time when access in health care is most critical.”

The Aurora model allows health care to be delivered in a way that balances consumers’ demands for quality and affordability.

Quite simply – Aurora’s model of doctors, hospitals, therapies and all other health and wellness services working together leads to higher quality and helps to better manage the costs of care.

One final point – Aurora is among the leaders when it comes to scrutiny and openness on quality . Aurora is part of numerous national and statewide initiatives to measure and report on quality. As for prices, all health systems negotiate individual contracts with insurers. In the end, the two sides agree on a contract and live up to terms of the deal. Unfortunately, in the case of WPS – they have chosen to ignore their commitment.

Additional information on this matter is available at

Dad29 said...

All I know is what I read in the paper.

...and it's clear to me now that the headline I used: 'more smoke' was accurate.

...with a straight face (!!!) you tell me that "competition" keeps prices down. Yah, hey.

Aurora, Covenant, and Col/StM's have emplaced clinics and hospitals all over the Milwaukee area, at a rate FAR exceeding the growth of population, and SE Wisconsin is the ...what...4th highest-priced healthcare market in the USA.

Some "price" effects.

Anonymous said...

Don't forget supply/demand works in other parts of the hospital equation too. Right now, there are hundreds of openings for Registered Nurses in SE Wisconsin.

Since there is a shortage of RNs, the prices for RNs have gone up to those that consume them (hospitals, clinics, etc)

The more hospitals/clinics that are opened, the more RN's that are needed. The more RN's that are consumed in the market, the higher our prices become as consumers of health care.

Within a 5 mile radius of my house there are 8 AHC clinics, 2 AHC hospitals, 16 pharmacies,2 Urgent Care clincs, 5 Rehab facilities and 4 Behavioral health units. All within 5 miles.

Too many facilities, not enough RN's or paying customers.

The other thing is that I can shop around for a new car, but have you ever tried to shop around for an MRI?

Anonymous said...

I'd love to know your source for claiming we're the 4th highest market for cost. The point is that a lot of people are aging...and guess what, they're going to need more health care. Do you want to ever be in a position where you need a procedure and find yourself put on the waiting list.

From the standpoint of competition.....right now, your insurance companies negotiate prices with health care providers....the fact is, UnitedHealthcare and Humana signed long-term contracts with Aurora...and their point is that Aurora is competitive with the marketplace. Humana and UnitedHealthCare both have said if Aurora was too expensive, they would not have signed long term contracts.

Interesting argument about the "paying customers." You may not be aware that every person who shows up for health services must receive those services -- no matter their ability to pay. You can't ration health's illegal.

Dad29 said...

Well, ANONY, let's start with this little gem:

"Health care costs in Milwaukee were found to be 55% above the Midwest average, according to a recent study by the consulting firm William M. Mercer."--Milwaukee JS, Apr 26, 2002.

THEN we can look here:

"Among the 65 companies with 500 or more employees surveyed in Wisconsin, the average annual employer cost for health care rose to $7,618 per employee, an increase of 8.3%. Employers expect an increase of about 12.5% in 2004, the survey says.

"Nationally, the average cost of health benefits for employees, which includes all medical and dental plans offered, rose 10.2% to $6,348 in 2003, according to a Mercer study released today."--Milwaukee JS, 12/7/03

That's a $1200/year difference over the average.

What does Mercer say about 2005?

Anonymous said...

how can you base your comments on data that is more than 4 years old? And......if a health system's annual increase is under 5%....that's significantly below any national statistics on the annual overall costs for health care. If a companies health insurance premiums go up 10 to 15% in that same year....what accounts for the percentage increase that is above the health system's increase?