Wisconsin Has Nation’s 4th Highest Hospital Prices

Ascension Columbia St. Mary’s Hospital. File photo by Jeramey Jannene.

What the heck is wrong with Wisconsin? Why are its health care costs so high?

Wisconsin, notes a new report by Third Way, “has the highest prices in the Midwest and the fourth-highest prices nationally…. Wisconsin hospitals charge insurers 26% more than Illinois hospitals for the same types of inpatient care. As a result, Wisconsin families pay about $1,000 more annually than families in neighboring Illinois.”

“Even Advocate Health, which operates in both states, charges 23% more for the same services in Wisconsin than in Illinois,” the report notes.

Wisconsin also has the highest hospital prices among other neighboring states. “RAND reports that Wisconsin’s commercial hospital prices are 321% of Medicare rates, compared with 254% nationally. Wisconsin’s rate is 21 percentage points higher than Indiana’s, 83 points higher than Minnesota’s, and 132 points higher than Michigan’s,” the report found.

And there is no evidence this results in better quality care for Wisconsin patients. The report cites a study by the Leapfrog Group, which evaluates hospital safety and quality. It found that Wisconsin ranked 30th in the nation, well behind Michigan (which ranked 19th) and Illinois (21st) in the safety and quality of care.

Why is Wisconsin so much more expensive than other states?  Third Way, which calls itself “a national think tank and advocacy organization that champions moderate policy and political ideas,” cites two reasons why Wisconsin is such an outlier.

First, the state has a higher concentration of big hospital chains and thus less competition. In Wisconsin, the Advocate Aurora system operates 18 hospitals, Ascension Health operates 16, Froedtert & the Medical College of Wisconsin operates 10, the Mayo Clinic operates seven and SSM Health operates seven hospitals.

“Wisconsin’s hospital market is 24% more concentrated than Illinois’s, with large systems controlling a bigger share of the market,” the report notes. “Many of Wisconsin’s largest health plans are also owned by hospital systems, allowing the same organizations to control both insurance coverage and the hospitals and physicians in their networks. That gives integrated systems additional leverage when competition is weak.”

“Hospitals can also leverage their market power during contract negotiations with health insurers to drive up prices,” the report continues. “They can demand higher prices not only from hospitals that dominate a particular area but also from other hospitals and physician practices they own elsewhere in the state. For example, a hospital system can insist on an all-or-nothing contract covering all its facilities and clinicians.”

The second reason for Wisconsin’s high costs: a lack of reform. “Several Heartland states are directly taking on high hospital prices. Wisconsin, by contrast, has struggled even to enact stronger disclosure rules,” the report notes.

“Indiana once looked like Wisconsin, with some of the nation’s highest hospital prices.” But then employers and state legislators pushed for a law that required hospitals to disclose prices using Medicare as the benchmark, and prices began to fall at some but not all hospitals. Indiana then “required nonprofit hospital systems to offer employers direct contracts at no more than 260% of Medicare in 2025,” and has also banned anticompetitive hospital contracting practices, the report notes.

Minnesota, Illinois and Michigan have also passed reforms that include tight scrutiny of health care mergers and hospital expansions; a law requiring disclosure of facility fees, upfront patient prices and hospital 340B revenue; regulating facility fees; and limiting charges and debt collection for uninsured patients.

Wisconsin, compared to this, has been very passive, the report notes: “bipartisan legislation to strengthen transparency failed last session.”

The potential national savings from some of the reforms pushed by some of Midwestern states could be immense. “The Council of Economic Advisers estimates that prohibiting anticompetitive hospital contracts could generate $45 billion in annual savings nationwide,” the report notes.  “The Urban Institute estimates that capping hospital prices at 250% of Medicare could generate $46 billion in annual nationwide savings.”

In short, there is a lot Wisconsin could do to change its current status as the fourth most expensive state for hospital care. As of January we will have a new governor and new legislature. Health care reform should be a priority for business and union leaders and state policy makers.