HELENA - In testimony on a bill proposing a database on health care costs in Montana, an insurance executive Monday detailed what he said is "monopolistic, predatory price behavior" by one of the state's largest hospitals.

"The truth is, most Montana hospitals operate with no competition; they are monopolies," said Eric Schindler, CEO of the Montana School Services Foundation, which oversees a health insurance trust for 136 school districts in Montana. "The trend toward an integrated model of hospitals (that also employs physicians) makes them even more of a monopoly."

Schindler said Benefis Hospital in Great Falls, the second-largest hospital in the state, has increased its prices more than 30 percent in the past three years, both through direct price increases and by reducing the discount it gives as a "network" provider for insurance customers.

The increases came in the wake of the 2006 lifting of a state ceiling on Benefis prices, which had been imposed in 1999 when two competing Great Falls hospitals merged to create Benefis, Schindler noted.

"Why did Benefis increase costs 16 percent this year to Montanans? Because it can," he said.

Benefis officials said Monday evening that its average inpatient prices are 2.6 percent less than its Montana peers and that the 16 percent figure is overstated, because it relates to a loss of discount and doesn't equal a straight price increase.

"Benefis charges far less for care than our peers here in Montana and we have low costs and charges when compared with other parts of the state," said John Goodnow, the president and CEO of Benefis. "We are firm believers that an organization can be both low cost and high quality - and we prove it, year after year."

Schindler made his comments while supporting House Bill 573, which directs the state insurance commissioner to study what it would take to create a statewide database on health care costs.

Rep. Chuck Hunter, D-Helena, the sponsor of HB573, told the Senate Public Health Committee that federal health reform didn't come close to attacking or examining the rise in medical costs, and that the database would be a step toward pinpointing why those costs are escalating.

"How does it occur? When does it occur?" Hunter said of health care price escalation. "This is about providing the data set that helps answer those questions."

Spokespersons for school employees, Montana nurses, the Billings Clinic and community health clinics spoke in favor of the bill; no one opposed the measure.

Schindler's testimony, however, was clearly the highlight of the hearing, as he laid out what he said were huge price hikes by Benefis in the past three years.

The hospital increased its prices 9 percent in both 2009 and 2010 and announced last month it would not increase any prices this year, he said. However, the hospital then revealed it was reducing discounts to patients that use it as a network provider, increasing their costs by 16 percent.

"The (Benefis) chief financial officer said, ‘It's not as bad as it seems, because we increased our prices 9 percent the last couple of years, but we're not going to increase them this year,' " Schindler said he was told. "Wow, what a break: 9 percent, 9 percent and 16 percent ... a 34 percent increase. And we wonder what's wrong with our health care system.

"The 16 percent increase from Benefis is a monopolistic, predatory price behavior."

Goodnow, of Benefis, said the hospital still offers the discount to Montana-based insurers, but ended it for out-of-state insurers. The insurance trust managed by Schindler for the schools last year hired a Seattle firm as its network manager.

"Bring that business back to the state of Montana instead of Seattle and you'll get your discount," Goodnow said.

Schindler said one reason he chose to make the information public is to let Benefis board members know about the cost increases, in the face of public statements by executives that prices aren't being increased.

Missoulian State Bureau reporter Mike Dennison can be reached at 1-800-525-4920 or at mike.dennison@lee.net.

 

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