Miami-Dade County, Like Many Employers, Denied Tools To Trim Health Costs

Last year, Miami-Dade County employees, retirees and dependents cost the county’s health plan about $2.25 million for medical procedures that fell under an obscure-sounding category called “major joint replacement or reattachment of lower extremity,” according to AvMed Health Plans, manager of the county plan.

But even though at least eight hospitals provided the service — which could range from a hip replacement to reattachment of a foot — no two hospitals were paid the same amount.

The average payment varied widely — from $12,644 at Memorial Hospital West in Pembroke Pines up to $37,622 at Doctors Hospital in Coral Gables. Even among hospitals next door to each other, the average payment was significantly different: $29,978 at University of Miami Hospital but $13,475 at Jackson Memorial Hospital across the street.

The numbers, provided by AvMed, offer some insight into Miami-Dade’s employee health benefits expenses. But healthcare experts and hospital administrators say that because they are averaged payments, they also obscure details that would allow the county to truly understand and manage its labor healthcare costs.

“From an employer perspective, it would be difficult to look at these numbers and figure out exactly what is going on,” said Steven Ullmann, director of health policy at the University of Miami business school.

As the county negotiates with labor unions over proposed changes to employee health insurance — potentially requiring a biweekly premium for employees who currently pay none and increasing premiums for others — healthcare price transparency has become increasingly critical for the county and its workers.

But like many employers across the country, Miami-Dade isn’t allowed to know the prices their own insurance plan administrators negotiate with healthcare providers, even when they’re self-insured, like the county, and the claims are paid with taxpayer dollars.

AvMed won’t divulge the rates on the grounds that they’re proprietary and confidential. That means Miami-Dade officials never get to see precisely how the insurance company spends more than $400 million a year to pay healthcare claims for nearly 60,000 employees, retirees and dependents.

Instead, in response to a public records request from Miami-Dade’s labor unions, AvMed produced charts showing the top 10 medical services by spending, and the average payment for those services — including joint replacement — at some hospitals.

But Ullmann noted there’s no indication in AvMed’s figures about case complexity, which could explain why one hospital received a higher average payment than another for the same procedure.

Nor do the averages indicate whether the payment includes the physician’s services and other related expenses, he said. Perhaps more importantly, there’s no indication of quality of care — a factor that drives patient choice and helps determine the value of healthcare.

“The bottom line,” Ullmann said, “is even when you have numbers, it’s difficult to get transparency — transparency to really see what the numbers mean.”

If Miami-Dade knew the contracted rates that AvMed has negotiated with hospitals for specific medical services, Ullmann said, county officials would be better equipped to manage healthcare costs by steering employees to lower-priced providers or by leaving some facilities out of the network.

But Jim Repp, vice president of sales and marketing for AvMed, said in a written statement that “without question” the averages can help the county control its healthcare costs.

“The data we provide our self-funded clients allows them to analyze and understand utilization patterns,’’ Repp said. “They then work with us to modify the existing plan design as an opportunity to lower the overall incurred costs the following year.”

Indeed, while AvMed will not divulge exact healthcare prices, Miami-Dade officials could use some of the aggregated data to lower costs in the long run, said Sal Barbera, a veteran hospital administrator who now teaches healthcare administration at Florida International University.

For instance, he noted, Miami-Dade spent nearly $2.6 million in 2013 on a medical service called “operating room procedures for obesity,” which could range from gastric bypass surgery to stomach repair.

It was the single most costly medical service to the county’s plan last year. But Miami-Dade administrators could try to lower those costs, Barbera said, if they “look at ways they could start attacking these particular diagnoses, and maybe minimizing the cost for these diagnoses by doing something proactively to avoid them.”

But Martha Baker, president of SEIU Local 1991, the union representing doctors and nurses at the county-owned Jackson Health System, said Miami-Dade’s health plan manager has hardly begun to explore the potential savings of such programs.

“AvMed hasn’t come through on a real wellness program,” Baker said. “AvMed hasn’t come through in managing chronic diseases. … There’s a lot of money to be saved in healthcare in Miami-Dade. Encourage employees to walk more.”

Corey Miller, and AvMed spokesman, said wellness and disease management programs can be implemented in the future at the county’s direction, and its expense.

But price variation among hospitals remains an unexplored well of potential savings.

AvMed’s charts show a difference in average payments for the same medical services when they’re performed at Jackson compared to other hospitals. For example, childbirth by Cesarean section ranged from $8,075 to $9,751 in the data, while Jackson’s average was $3,708.

An AvMed representative speaking at the county’s labor healthcare committee meeting in April said variations in payments can be attributed to the facility, the complexity of the individual procedure, and contract negotiations.

“Why Baptist [Health South Florida] charges more than Jackson … that’s a very individual question for each facility, and each negotiation,’’ Patricia Nelson, AvMed’s regional head of strategic accounts, said at the meeting.

Duane Fitch, a healthcare consultant for SEIU 1991, said the average payment of $15,513 to all other hospitals for an overnight patient admission — versus the average payment to Jackson of $9,380 — indicates that “some providers are receiving two, three, four times the amount that Jackson is receiving for the same services.”

“It just seems like a wasted opportunity,” he said, “not to explore this pricing variance.”

But comparing average payments doesn’t offer employers enough information to make changes, said Frank Sacco, chief executive of Memorial Healthcare System, the public hospital network for South Broward County.

Sacco said averages do not reveal which hospital’s patients may have needed more intensive and expensive treatment.

“You have to be apples to apples,” when comparing treatment costs, he said.

To be sure, Sacco said, some price variance among hospitals can be attributed to contract negotiations with insurers.

“I think our contracting people do a better job than, historically, Jackson has been able to accomplish,” he said.

Part of a hospital system’s advantage also comes from regional dominance. Like Memorial Healthcare, which has six hospitals across South Broward, Baptist Health has seven hospitals and dozens of outpatient and urgent care centers across South Miami-Dade and parts of Monroe — the type of presence that bestows “must have” status on hospital systems when they negotiate rates with insurers, said Barbera, the FIU expert.

“It would be very difficult for any third-party payer in Miami to have a plan and not offer Baptist,” Barbera said.

Karen Godfrey, Baptist Health’s corporate vice president for revenue management, said she could not address the hospital system’s negotiations with health insurance companies. She said Baptist Health focuses on providing “value” — not just the lowest price.

“As an employer,’’ she said, “I think I would want to understand what is the holistic picture in terms of what that provider brings to the table and brings to the community. … It’s a central piece of Baptist Health’s strategy to focus on prevention and wellness, and by doing so to control costs.’’

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