A national health advocacy group is blaming hospital consolidation in Maine for spurring higher prices at hospitals for patients with private insurance.

But Maine hospital officials say consolidation is not the force driving the prices, and that the explanation lies with the state’s older population and low Medicare reimbursement rates that shift the costs of health care to younger people with private insurance.

Maine’s two biggest hospital systems – MaineHealth and Northern Light Health – have both grown larger over the last 20 years, with formerly independent hospitals joining their networks.

Mid-Coast Hospital in Brunswick and the former Goodall Hospital in Sanford are among the more recent additions to the MaineHealth system, which includes Maine Medical Center in Portland. Mercy Hospital in Portland and Mayo Regional Hospital in Dover-Foxcroft are among the hospitals that in recent years joined Northern Light Health, which includes Eastern Maine Medical Center in Bangor.

While independent hospitals and other networks remain – including Central Maine Healthcare in Lewiston and MaineGeneral Medical Center in Augusta – MaineHealth and Northern Light dominate the state’s health care market.

“What causes prices to rise uncontrollably, leaving patients subject to thousands of dollars in medical bills? Look no further than consolidation, where dominant hospital systems control markets and set prices as high as they’d like,” said Darbin Wofford, health policy adviser for Third Way, a center-left think tank based in Washington, D.C. Health care reforms are among the topics that Third Way advocates for, including clean energy, reforming gun laws and abortion access, among many other issues.

Third Way is releasing a case study analysis of Maine’s hospital costs on Thursday and provided the Press Herald with an early look at the findings.

In an interview, Wofford said consolidation in states such as Maine tips the scales heavily in favor of hospital networks when negotiating contracts with insurance companies. Those contracts influence the health insurance premiums, deductibles and other costs that people pay.

“Insurance companies can’t say to hospitals, ‘No, we don’t want to take your prices,’ ” Wofford said.

According to the Health Care Cost Institute, the Portland market was the 21st “most concentrated” health care market of 183 markets measured, which means Portland has less hospital choice for patients than much of the country. The Portland market was the only market measured in Maine.

Wofford pointed to hospital prices for private insurers, which are on average 275% of the prices Medicare pays for services, or nearly three times as high. Maine’s average costs are the highest in New England, and far above the national average of 224% of Medicare, it found. Maine’s average costs rank 19th among states. South Carolina is the state with the highest hospital prices for private insurers, at 322% of Medicare prices.

But Dr. Andy Mueller, CEO of MaineHealth, said the explanation for private insurance prices at hospitals has far more to do with Maine’s demographics.

When a higher percentage of the hospital patient mix is insured by Medicare – generally patients 65 and older – that skews hospital prices. Because Medicare’s reimbursements are so low and do not cover hospitals’ actual costs, the difference has to be made up by private insurers, Mueller said.

That’s true of any hospital in the country. But, he said, “we’re the oldest state in the nation.”

OLDEST STATE IN THE NATION

According to the U.S. Census, Maine’s median age is 44.8 years, the oldest in the nation. “That puts a greater burden on those who have commercial insurance to make up the difference,” Mueller said.

Terri Canaan, chief marketing and communications officer for MaineHealth, pointed to an analysis that showed Maine’s Medicare spending per enrollee – which includes hospital and non-hospital spending – is below the national average. The national average is $11,080, while Maine’s spending is $9,159 per enrollee, according to KFF, a national health policy think tank.

Health care costs are influenced by a number of factors, such as the push and pull of health care network contract negotiations with insurers, the health and demographics of the population served, federal and state regulations, and competition among health care providers, among other things.

A Forbes Advisor analysis in 2022 combined 11 key health care cost metrics to try to determine the difference in health care costs by state. By that measurement, Maine has the seventh-highest health care costs in the nation, at $11,505 per person. South Dakota was the most costly in the nation, with $11,736 per capita, while Michigan had the lowest health care costs at $9,524. The analysis includes all health care costs, not just the costs incurred at hospitals or costs paid with private insurance.

Denise McDonough, president of Anthem Blue Cross and Blue Shield in Maine, said hospital consolidation is one of the factors driving up costs in Maine.

“We have seen significant hospital consolidation in Maine over the years, which has reduced competition, increased costs, and limited access to care – leaving Mainers with less choice,” McDonough said.

Anthem and MaineHealth became embroiled in a public contract dispute in 2022, with Maine Medical Center nearly withdrawing from Anthem’s network in 2023 before an agreement was reached in August 2022. The dispute became public with both sides providing the media with examples of hospital overcharging of patients, and of the insurance company denying needed care.

Both Anthem and MaineHealth officials have claimed that the other side has too much leverage in negotiations.

Mueller, on Wednesday, countered the argument made by Third Way that Maine’s hospitals have leverage over insurers.

“We’re still a ‘mom and pop’ industry in comparison to the consolidation that has happened on the health insurance side,” Mueller said. “These are massive companies, and we are not, relative to (insurers). We are a tiny speck on the wall compared to them.”

REFORMS PROPOSED

Third Way has proposed a number of reforms, including tougher price transparency laws, and laws that they say would help insurers when negotiating with hospital systems.

Maine is debating regulation of facility fees, which can reach hundreds of dollars for patients for just walking into a hospital for care and are often hidden in medical bills and passed onto the patients. After a Press Herald report in 2022 that featured patients complaining about facility fees, the Maine Legislature passed a bill that created a task force, which is studying possible changes to state law.

The federal government requires hospitals to disclose prices, but some say the law doesn’t go far enough and lacks an enforcement mechanism. Maine has the CompareMaine.org website, which allows for comparison pricing of some procedures, such as colonoscopies, blood tests and hip replacements.

McDonough, the Anthem president, agrees that more needs to be done, and calls Third Way’s suggestions a “good first step.”

But Mueller, the MaineHealth CEO,  said that one of the bills currently under consideration by the Maine Legislature would protect insurers’ ability to reduce costs, such as by giving financial incentives to patients to go to less expensive clinics. MaineHealth does not prevent such cost-saving efforts, he said.

But Mueller said also built into the bill – L.D. 1708 – is a provision that would prevent hospital networks from terminating contracts with insurers.

“The only leverage we have is to terminate a contract,” Mueller said. “We believe we ought to have the ability to terminate an agreement the other party is not living up to.”

McDonough said, “we hope we can continue the conversation about greater transparency and advance legislation to protect members’ access to affordable care.”

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