Exclusive: Report shows Wisconsin health care costs 25.6% more than same services in Illinois

(The Center Square) – Wisconsin hospitals charge 25.6% more to patients for in-person care than hospitals in Illinois, even within the same company, according to a new report shared exclusively with The Center Square.

Costs for hospital services are negotiated between hospitals and insurance carriers and fewer options on each side of the negotiation mean less leverage to negotiate.

In particular, hospitals that are able to negotiate percentage-of-charge contracts where prices rise over time instead of set fees for particular services are more expensive to patients, according to the study from the University of Wisconsin-Madison’s Anthony Lo Sasso and Capital Policy Analytics’ Ike Brannon.

Lo Sasso said that the results are less about Illinois being cheaper than about Wisconsin being an outlier as more expensive than other states, something he isn’t certain the public knows. He told The Center Square that hospital consolidation in Wisconsin has been a “slow burn” over time that has created less competition and higher costs.

“The speculation is that the Wisconsin local markets are just not very competitive,” Lo Sasso said. “… There’s been a lot of consolidation over the past 10-20 years and so it’s just led to increasing levels of what we in the business call market concentration.”

Lo Sasso said that the higher costs showed up statewide and not just in the competitive Chicago market, but that the difference was even slightly higher between Wisconsin and areas outside of Chicago.

About 45% of patient charges are calculated using percentage-of-charge while 24% are in Illinois.

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“Payers generally accept percent-of-charge terms only where they lack the leverage to insist on fixed dollars, so the concentration of such contracts in Wisconsin is consistent with the strong provider bargaining position that a consolidated hospital market confers; and because these contracts give hospitals a standing mechanism to raise realized prices, they may help entrench the very premium this report documents,” the report states.

Wisconsin Advocate Health hospitals in Wisconsin receive 23% more for the same services as the company’s hospitals in Illinois.

Blue Cross Blue Shield and UnitedHealthcare customers are each charged more than 25% more for the same services in Wisconsin as in Illinois “indicating that the gap is a feature of the Wisconsin provider market rather than any single insurer’s contracting strategy,” according to the report.

The same was true for each of the 24 inpatient procedures that were examined in the study across specialties.

Lo Sasso said that he plans to study the reasons that the Wisconsin is more expensive and what can be done to combat that in future research. He said that Wisconsin must first acknowledge that the cost of health care is an issue before combating what led to it.

He said that encouraging new facilities in the marketplace and greater scrutiny of future hospital mergers could have an impact.

“Building new hospitals and facilities that can act as and create a competitive market at a state and local level I think would be very important, long run,” Lo Sasso said. “A hospital is not going to spring up overnight but, basically, encouraging that to the extent possible would have very positive downstream effects.”