Phoebe Putney Health System: Rand study is 'cherry-picked'

Brian Church, chief financial officer for Phoebe Putney Health System, said recent data released in a Rand Corp. study regarding hospital prices did not offer the public a comprehensive picture.

ALBANY — Following the release of a recently published analysis of hospital prices showing Georgia in the top third among 25 states studied, the stance of Phoebe Putney Health System officials is similar to that of the Georgia Hospital Association.

The Rand Corp. data used prices paid by health insurers under employer-based coverage, and compared that spending to what Medicare pays at the same facilities. Ethan James of GHA told Georgia Health News that the Rand report is “not a study.”

The GHA called it “cherry-picked’’ data intended to be used by employers and insurers to negotiate lower payments to hospitals.

“We agree with the GHA’s conclusion that the Rand ‘study’ is not a comprehensive study that accurately reflects hospital pricing in Georgia,” Phoebe Putney Health System Chief Financial Officer Brian Church said. “It is based on cherry-picked data and does not take into account the lack of Medicaid expansion in Georgia, low Medicare and Medicaid reimbursement rates in Georgia and the high rate of uninsured Georgians.

“At Phoebe, we work diligently to set prices that are competitive with our regional and national peers, and the data show our charge list benchmarks below many of those competitors. Our Phoebe pricing philosophy offers insight into how we work to ensure our pricing structure allows us to fulfill our mission while offering fair and competitive prices to patients.”

James said the study does not address the underlying cause of the shift toward insured patients paying higher rates for treatment. Those rates, he said, stem largely from the fact that Georgia has one of the nation’s highest rates of people without health coverage. The private insurance reimbursements are helping cover the cost of care for nonpaying patients, he said.

He noted that problem is the reason GHA supports Gov. Brian Kemp’s waiver proposal that could increase the number of adults covered by Medicaid in the state.

The sampling used in the study is limited, with claims studied representing only a small share of the employer-based insurance market, the authors acknowledge. The price analysis was presented at the conference of the National Association of Insurance Commissioners, as the hospital industry was feeling the jolt of a Trump administration proposal on pricing.

That proposal, announced last month, would require hospitals to post the prices they negotiate with insurers for just about every service, drug and other resource they supply to patients. Hospitals and insurers are fighting the plan, which is supposed to take effect in January.

Other recent research, meanwhile, has pinpointed metro Atlanta as being in the top third of urban areas in health care pricing.

In the Rand analysis, the states among the 25 studied that ranked with higher combined inpatient and outpatient costs than Georgia are Indiana, Wyoming, Maine, Wisconsin, Montana, Colorado and Texas. The report outlined a large discrepancy between prices that Medicare pays and those paid under private insurance. And the analysis said outpatient care costs are a big driver of spending growth.

Higher prices in some areas of the nation have been linked partly to medical provider consolidation and in some areas to the presence of hospitals with very high consumer appeal so that insurance networks feel obliged to affiliate with them. Hospitals say they pursue mergers to reduce their costs of doing business and to increase their bargaining power when they negotiate with insurers about reimbursement.

Georgia has seen widespread hospital consolidation in recent years.

Phoebe Putney Health System said its pricing philosophy is that, to continue the mission of delivering the best possible care and exceed patient expectations, the organization must be financially strong, provide high-quality services in an efficient manner, and reinvest in capital through work force, buildings, equipment and technology benefiting the health status of the community and patients.

“In order to remain financially strong, we need to have a positive operating margin and maintain a strong bond rating compared nationally and regionally to peer hospitals in our industry,” the “Phoebe philosophy” said. “A positive operating margin enables Phoebe to maintain a healthy financial position that creates funding for Phoebe to reinvest in the health system and community services we provide through operating cash flows and the financial strength of our balance sheet to borrow needed long-term capital at low costs. Our process is to review pricing for services at least annually through a comprehensive internal and external assessment.

“During that assessment, we review extensive data and prices for our local, regional and national peers to ensure our prices are within industry norms. Our pricing assessment takes into account unique market demographics such as high percentages of Medicaid, indigent and charity patients in our community whose reimbursements often do not cover the costs to provide the health care services. The annual pricing assessment includes a detailed overall review of the annual U.S. Department of Labor’s Consumer Price Index for Hospital and Related Services. The CPI review provides national data points on overall industry price increases in hospital and related services we can compare to Phoebe’s actual pricing. Where possible while balancing our cost to provide the service we reduce prices that are particularly patient sensitive or can offer a lower price point in a lower cost setting. An example of a lower cost setting would be outpatient services.”

Andy Miller of Georgia Health News contributed to this report.

Staff Writer

I'm a 2007 graduate of Georgia Southern University, and I've been a reporter for The Albany Herald since 2008. I cover news related to health care, Marine Corps Logistics Base-Albany, SOWEGA Council on Aging and other areas as assigned.

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