Health care spending was up sharply in Minnesota last year

Spending on health care surged 5.9% in Minnesota last year, largely due to a rise in the cost and use of prescription drugs and outpatient surgeries and clinics.

Total spending per patient per month was $596 in 2018, compared to $563 in 2017 and $475 in 2013, according to an analysis released Thursday by Minnesota Community Measurement, a nonprofit agency that monitors' clinics based on their quality and costs.

The analysis also shows variation in spending by clinic — with a high of $1,095 per month for patients who received primary care at Mayo Clinic in Rochester, and a low of $428 for Avera patients in Worthington — but it isn't intended as a buyer's guide, said Julie Sonier, Community Measurement's president.

"Nobody is going to drive 200 miles to a cheaper place," she said. Still, revealing the differences among clinics can "start a public conversation about costs and the drivers that increase costs," she added.

Studies in other states have found that differences in clinic costs are due to the amount of tests, prescriptions and surgeries they order. But Sonier said that isn't the case in Minnesota, where doctors adhere to research-based guidelines about treatment.

Price is what separates clinics in this state, where a simple tone hearing test can range from $17 at Dakota Pediatrics in Inver Grove Heights to $53 at Carris Health in Willmar.

Prices are sometimes higher in rural areas, where supplies and staffing can be more expensive, but the differences often come down to the negotiating leverage that clinics have when they are the only providers in a town or region, Sonier said.

Costs and prices were highest for Mayo's medical groups, which dominate the market in southeast Minnesota.

Mayo officials said in a statement that they "continue to have concerns" about the methodology of the analysis, which assigns patients to primary care clinics based on where they received most of their care in a year. Costs for Mayo's Rochester clinic are inflated by the number of severely ill patients who receive routine care there while also receiving complex treatment at the hospital.

Even so, costs are higher for Mayo clinics elsewhere such as St. James, where the per-patient, per-month amount was $762. Mayo's only clinic with below-average costs last year was in Owatonna.

The amounts reflect care that patients received at their primary clinics, but also at hospitals or from specialists. The idea is that primary care doctors are responsible for keeping patients at optimal health through timely screenings, weight management, and preventive care, so the primary care physicians are at least somewhat responsible for their total medical costs.

As in prior years, the lowest-cost providers tended to be independent primary care groups in the Twin Cities.

While these clinics provide good care, they mostly are lower cost because they don't have the clout to negotiate higher prices with the major insurance companies in Minnesota, said Matt Brandt, chief executive of Hudson Physicians, where the total cost per patient was $469 last year.

"The hardest part about health care is that being low cost is probably a good way to go out of business," said Brandt, noting that patients with standard copays don't have much incentive to switch to lower-cost providers.

Sonier said she was surprised that costs didn't increase even more last year given the number of clinics that increased their negotiating leverage by merging with larger groups.

St. Paul-based HealthEast merged in 2017 with Minneapolis-based Fairview, but costs remained below the state average in their cities last year.

"It surprised me a bit … that the Twin Cities was lower cost," she said, "and that the reason was because of price."

Clinics with higher total costs tended to charge higher prices rather than order excessive tests, according to the analysis, which was based on insurance claims for 1.6 million Minnesotans and weighted to account for clinics with the sickest patients.

Spending has leveled off statewide for expensive inpatient hospital care but increased for professional services such as doctor visits and for prescriptions — both due to the high initial prices of new drugs, and the inflation of prices for old drugs when manufacturers have no competition.

"Employers and their employees know that health care costs are high and moving continually higher," said Bentley Graves, a health policy analyst for the Minnesota Chamber of Commerce. "This report identifies where employers, consumers, policymakers, and other stakeholders need to focus their collective attention to tackle this trend."