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Midwestern Town the Anti-McAllen, TX, for Medicare Costs

 |  By HealthLeaders Media Staff  
   July 27, 2009

Doctors in McAllen, TX, became part of the growing national furor over rising healthcare costs. As you may recall, a June New Yorker magazine article, paraded McAllen before the public as "one of the most expensive health-care markets in the country"—second only to Miami—costing the government $15,000 per Medicare beneficiary in 2006.

McAllen doctors have since come out swinging, saying the article didn't take into account the extreme poverty in the area or that many patients had co-morbidities by the time they had their first medical encounter. The story has had a lot of air time with the Medicare cost curve being a central focus for legislators and President Barack Obama, as witnessed in his televised address last week on healthcare reform.

In recent weeks, the President also has singled out high spenders like McAllen, while praising the efficiency and care coordination in places like the Cleveland Clinic and the Mayo Clinic in Rochester, MN.

He might also want to take a look at the town of Winona, MN, where Medicare costs are about two-thirds less than those in McAllen, says Mike Allen, CFO of Winona Health, a nonprofit integrated system that includes a 100-bed hospital, 50 physicians, a nursing home, and two assisted living facilities. In addition to having the distinction of being named Most Wired-Small and Rural Hospital by Hospitals & Health Networks magazine for the last several years, Winona Health is in a region that boasts the state's lowest Medicare beneficiary rates.

Allen says, according to the same The Dartmouth Atlas of Health Care data from which the McAllen numbers were cited, spending per Medicare beneficiary in Winona's HSA was approximately $4,900 in 2006. The state averaged $6,600 in the same study, lower than the national average of $8,300.

"We're the anti-McAllen," says Allen. "Some of the Medicare costs differences can be due to the cost of living and demographics in certain areas, but that doesn't explain costs of two to three times more in one part of the country vs. other areas."

Allen believes the region's coordinated care approach is a significant driver in lowering costs. He credits the Mayo Clinic, just 50 miles down the road from Winona, as a major cultural influence on providers in the state and across the Midwest. Many providers in the state and area are integrated, he says, pointing to Gundersen Lutheran Health System in LaCrosse, MN, and the Marshfield (WI) Clinic.

"Costs are lowered through care coordination and integrated healthcare systems where physicians work in the same organizations," he adds, noting that nearly all of Winona Health's physicians are employed by the system. "We also have less duplication of tests in this area." As a side note, Allen points out that the Midwestern culture may also affects costs. "Culturally, Minnesotans are pragmatic, which plays out in individual choices and how providers use the medical resources to treat people."

Still, for all the outrage over McAllen and all the talk about bending the Medicare cost curve, Allen is skeptical that anything meaningful will come out of a healthcare reform bill that rewards low cost, high quality providers, mainly because of politics.

"The McAllen story is known, but I am concerned that nothing will change because places like Texas that are high spending don't want to give any money back." At the same time, he adds, "low cost states in the low-cost areas don't have enough population, so they don't have the representation or political clout to push through healthcare reform that stops paying places like McAllen, TX, and rewards areas such as Minnesota, which spend less per beneficiary."

Politically, says Allen, it's easier and faster to just cut payment levels for all providers instead of segmenting out the high-quality, low-cost producers. "Of course, that's not a very well thought out strategy. Anybody can do that."

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