Bruce Murphy
Murphy’s Law

Milwaukee Medical Costs Finally Declining?

Long known for globally high costs, Milwaukee show signs of a relative decline in prices.

By - Aug 6th, 2013 10:36 am
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Dr. Rory Wright. Photo courtesy of Orthopaedic Hospital of Wisconsin.

Dr. Rory Wright. Photo courtesy of Orthopaedic Hospital of Wisconsin.

This week Milwaukee orthopedic doctor Rory Wright got his 15 minutes of fame, getting quoted in a New York Times story on the high cost of medical care. The story noted the list price of a hip implant increased nearly 300 percent from 1998 to 2011, and quoted Wright, who said the price hike had nothing to do with costs. “They price this way because they can,” he said.

Wright thus helped buttress yet another story dramatizing the high cost of medical care in the United States compared to other countries. The Times led with the incredible tale of an Indiana architectural photographer who traveled to Belgium to have hip replacement surgery because it cost $13,660, compared to the $78,000 price tag in the U.S.

The “ludicrous” cost of American medical care was recently assailed in a column by the Washington Post’s Ezra Klein offering graph after graph demonstrating how much more it cost for any kind of procedure here versus in other countries. The U.S. now devotes 18 percent of its GDP to medical care, compared to an average of 10 percent in other developed countries.

If the U.S. offers the highest-cost care on the planet, Milwaukee has long been one of this country’s most expensive cities. Just a decade ago, medical care costs here exceeded those in many other parts of the country by 20 percent, suggesting we paid more here than almost anywhere in the world.

As recently as a few years ago, a study for the Center for Studying Health System Change looked at 8 health care markets in the nation and found Milwaukee ranked second in rates private insurers paid hospitals, at an average of 205 percent of the Medicare rate, compared to 210 percent in San Francisco. The lowest was LA, paying 149 percent.

Physician payments as a percent of Medicare were by far the highest in this state — at 176 percent of Medicare payments in rural Wisconsin and 166 percent in Milwaukee — and far lower everywhere else, with Miami at the bottom, paying just 82 percent of the Medicare rate. (Had the study been done five years earlier the results would have probably been even worse for Milwaukee.)

But the most recent survey by HCTrends found that Milwaukee’s health care costs had dropped to just two percent above the national average. And the Times story noted that Orthopedic Hospital of Wisconsin, the Milwaukee facility that Wright works for, “has driven down payments for joints by more than 30 percent by resolving to use only two types of hip implants and requiring blind bids directly from the manufacturers.”

Dr. Brian Cramer, CEO for the hospital, tells me the hospital has also used this approach to lower the cost of the total knee implants it does. It has a committee of physicians who screen providers for quality and then narrow it down to two or three companies it asks to submit a bid.

“We do 500 knees and 250 hips a year and they know they will get at least 90 percent of our business if they are chosen,” he explains. So there’s an incentive to offer a good price.

It would be nice if this approach takes off in the entire metro area. Meanwhile, having Milwaukee as a national example of any kind of effort to lower medical costs is heartening, and another sign of local progress on this critical issue.

Good News For the Journal Sentinel?

Wow, are newspapers in decline. Perhaps nothing better illustrates this than last week’s sale of the Boston Globe. Its owner, the New York Times, had purchased the Globe for $1.1 billion in 1993, and that was nearly 16 times more than last week’s sale price of just $70 million.

But as Slate.com has noted, the deal saddled the Times with the $110 million in pension liabilities of the Globe, so the actual price tag was a negative $40 million.

As recently as April 2012, Philadelphia’s two-largest newspapers sold for just $55 million, a massive discount from the $515 million sales price in 2006. Still, that was a far more positive outcome than the Globe’s sale, suggesting the value of newspapers continues to plummet.

In that dismal context, Milwaukee’s newspaper looks like a shining star. Its value as measured by the stock market is soaring. A share of Journal Communications stock plummeted  from about $20 in February 2004 to just 49 cents in March 2009, but has since rebounded and now stands at a remarkable $8.79.  On all the key financial statistics (except debt), Morningstar ranks the company as performing above the average for its industry.

That price — and company revenue – is driven far more by the 50 radio and TV broadcasting operations it owns than by its key print publication, the Journal Sentinel.  Still, the newspaper has been doing relatively well, buoyed by all the political advertising in a state that has been ground zero for bitterly contested partisan elections.

Yes, the newspaper has been decimated by round after round of layoffs, but it has meanwhile been adding some younger, lower-paid staffers. I count about 95 reporters and editors (including 19 in sports), way down from the golden days, but still a huge contingent. And the paper has been winning countless awards for its watchdog stories.

I still don’t quite understand the paper’s emphasis on investigative reporting. If you go to the Most Popular page of JSOnline, its mostly sports, of course, but the rest tend to be straight news stories rather than watchdog reports: Walker compares himself to FDR, the mother’s testimony at the Spooner trial, 9 restaurants suspended for health reasons, Paul Ryan lays out his immigration proposals.

But you have to salute the ambition of the newspaper, which is probably doing more investigative reporting than at any time in its history. I suspect there are leaner days yet to come for the Journal Sentinel, but right now it looks in far better shape than many newspapers in America.

Categories: Murphy's Law

11 thoughts on “Murphy’s Law: Milwaukee Medical Costs Finally Declining?”

  1. dohnal(Wis. Conservtive Digest says:

    If these papers would turn Libertarian/Conservative, people would actually read them sometime.

    There is no reason that makes sense for how hospitals and doctors charge. It is imposible to figure out what they are doing.

  2. Stacy Moss says:

    This story on others on health care make me thing that maybe we should be demanding more of our doctors. Seems like it is not impossible to lower costs significantly but my doctor makes no effort to do so. We never talk about money. He doesn’t know about money. He is just going along for the ride and blames the insurance companies.

  3. Stacy Moss says:

    regarding a dohanl quip about more would read the newspaper if it were more libertarian/conservative.

    I can’t resist pointing out that there is not libertarian or liberal slant to most reporting, or rather the idea of reporting events. Don’t we just want to read a good newspaper that tries to tell the truth?

    Isn’t that was NEWS is…. something that happened, really happened and we read about it or hear about it.

    Don’t we want get out of ideological ghettos every once in awhile and breath some fresh air?

  4. dohnal(Wis. Conservtive Digest says:

    Newspapers have always been and will always be slanted one way or other. Will never change.
    It is even silly to think about it.
    The reason that they exist is that they have an agenda. Remember “Common sense”?

  5. Dave K. says:

    Doctors should be paid like conservatives pay teachers – on outcomes. If you’re a doctor with better outcomes, you get more money. Professional athletes are paid this way – both ticket prices to the games and the athletes statistics are both very visible. And this jives well with Capitalism – consumers make an informed decision about how they want to spend their money. For non-emergency procedures (heart attacks, stroke, trauma, etc, it’s a different issue), the consumer, however, has almost no visibility to how “good” the doctor is, and how much money they’re going to spend to get fixed up. Right now, the medical establishment and insurance companies are colluding to obfuscate prices and outcomes and intentionally confuse and confound consumers.

    If Wisconsin is 20% more expensive than the rest of the US, and the US is almost double what other countries are paying, you’d think Wisconsinites are the most healthy people in the world. Somehow I don’t think that’s the case.

  6. Kyle says:

    “If Wisconsin is 20% more expensive than the rest of the US, and the US is almost double what other countries are paying, you’d think Wisconsinites are the most healthy people in the world. Somehow I don’t think that’s the case.”

    I drew the opposite conclusion from that information. A car mechanic with too much work can increase his price to get more for his time and lighten his work load a bit. This price change just reflects the supply and demand curve, not that his service and outcomes suddenly improved. Also, I don’t know about you, but I tend to think poorly on my car when I’m spending more on maintenance and repairs. If my car is in the shop all the time, I don’t consider that a positive indication of the quality of the car. So when I see information about how much more is spent on medical care, I don’t think that means they’re healthier. Bypass surgery costs more than an annual checkup, but that doesn’t mean the person who got the bypass is healthier than the person who got the checkup.

  7. Jesse says:

    The js is already the local right wing rag… and it’s hemorraging readership. Bob Dohnal is in his own universe again.

  8. Chris Jacobs says:

    Paying doctors on outcomes simply means they won’t accept very sick patients. Nobody can prevent poor outcomes on someone with multiple grave medical problems.
    Is it really the doctor’s job to be shop pricing for the patient? Is it really his job to investigate your policy and see what your policy covers and how much you pay out of pocket? Does a car mechanic tell you that its cheaper to go across the street? Someone who is proactive can get the information they need. My friend going through chemotherapy and breast surgery knows exactly how much things are costing and how much deductible she’s used.
    There are very easy ways to save money on routine medical stuff, and physicians accept that information from anywhere. Much of it is by getting outpatient lab tests and radiological exams (CT and MRI), setting up clinic visits or urgent care rather than using the emergency room for non emergent situations. If you actually call or look up the costs of many outpatient lab exams, they have the prices, and they tell you which insurance companies they take.

  9. Observer says:

    Chris Jacobs, I work in healthcare and no one I work with has any idea of what they’re billed at, only what they end up with. Likewise good luck finding what, say an angiogram and heart cath, that President Bush just received, would cost them with or without insurance. Insurance companies do not all have the same needs for a pre-authorization. It’s a total SNAFU with plenty of blame to go around. Our present President is making baby steps toward transparency in costs. It’s long overdue. Straight Medicare patients are a breeze.

  10. Chris Jacobs says:

    I work in healthcare as well. I can tell you that a ballpark figure for something like angiogram and cath are usually given to a patient, likely around $1000 to $3000. Its unlikely that the patient is going to do much with that information, especially if such a procedure is urgent. If it isn’t urgent, you are free to shop around if you actually believe that going somewhere else would save you money. Generally, you still still have to pay until you reach your deductable. Shopping for the cheapest price for procedures may also be risking your health as well. You don’t get the best for cheap. One of the other major issues is that total cost is not known until the procedure is started or over. Therefore asking for a price is not going to help much because he cannot stop in the middle of a procedure. The physician may only know how many stents he is placed after cannulation has taken place. Although insurance companies do not have all the same needs, the hospital generally does not give the go ahead without prior authorization unless urgent.

  11. Jeff Kunz, MD says:

    Medical costs, as evidenced by its rising share of our GDP, continue to rise in a system that limits competition since society tacitly funds healthcare at the expense of education, wages, etc. In southeast Wisconsin there is a wonderful example of an employer and employees who have managed to reduce their medical costs through competition combined with incentives for medical effectiveness and efficiency. Take a close look at West Bend’s Serigraph Corporation and its CEO John Torinus.

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