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March 21, 2017

Mayo Clinic puts spotlight on issue of payer mix

Daily Briefing

    Mayo Clinic CEO John Noseworthy told employees in a video message late last year that the system would in limited cases prioritize privately insured patients when scheduling medical appointments—putting a spotlight on the issue of how hospitals manage their payer mix.

    Noseworthy added in later remarks that "medical need will always be the primary factor" in scheduling decisions, noting that half of Mayo's services go to patients with public insurance.

    Noseworthy remarks to Mayo staff

    In the internal video memo, which was first reported by the Minneapolis Star Tribune, Noseworthy said, "We're asking ... if the patient has commercial insurance, or (if) they're Medicaid or Medicare patients and they're equal, that we prioritize the commercial insured patients enough so ... we can be financially strong at the end of the year."

    According to STAT News, Noseworthy said the policy would affect only a small number of patients and would apply only when privately insured patients and those with government insurance were seeking care for similar problems at the same time. It would not affect patients seeking treatment in the ED. 

    Medicaid and Medicare usually reimburse at significantly lower rates than private insurers, STAT News reports. For instance, according to the Star Tribune, Medicaid typically covers between 50 percent and 85 percent of the cost of care. Mayo said it lost $546 million on indigent care and unpaid Medicaid portions in 2016, as well as $1.8 billion in unpaid Medicare portions.

    In the video, Noseworthy said a recent 3.7 percent surge in Medicaid patients, driven in part by the Affordable Care Act's Medicaid expansion, was a "tipping point" for Mayo. "If we don't grow the commercially insured patients, we won't have income at the end of the year to pay our staff, pay the pensions, and so on," Noseworthy explained.

    Issue not unique to Mayo, experts say

    Experts said the issue of payer mix is not unique to Mayo—but said it was rare for providers to discuss the issue publicly. Christine Spencer, a health economist at the University of Baltimore, said, "It's a surprise to hear it out loud like that, but hospitals, probably for decades, have engaged in these more subtle attempts to get privately insured patients over Medicaid or the uninsured."

    Daniel Polsky, a health economist at the University of Pennsylvania, said Mayo's public discussion of the issue  could actually benefit the industry. "I think there should be some public discussion about whether elite systems such as Mayo should provide equal access to all payer types," he said. "I don't know the answer to that, but it's a reasonable debate."

    'Medical need will always be the primary factor'

    In a statement to Becker's Hospital Review, Noseworthy explained that Mayo always would take patients in cases when it has medical expertise that a patient cannot access elsewhere. He stressed that "medical need will always be the primary factor in determining and setting an appointment."

    Noseworthy also expressed "regret" that his use of the term "prioritize" has led to "concerns that Mayo Clinic will not serve patients with government insurance." He added, "Nothing could be further from the truth. In fact, about half of the total services we provide are for patients who have government insurance, and we're committed to serving those patients."

    In a separate statement, Mayo officials added that "balancing payer mix is complex and isn't unique to Mayo Clinic." The Clinic continued, "It affects much of the industry, but it's often not talked about. That's why we feel it is important to talk transparently about these complex issues with our staff."

    Review by Minnesota Department of Human Services

    The Minnesota Department of Human Services (DHS) on Thursday said it would undertake a review following the remarks. According to Becker's Hospital Review, the review will examine whether Mayo's approach violates civil or human rights laws.

    DHS Commissioner Emily Piper told MPR News that DHS is also reviewing the department's contracts with Mayo, which served more than 150,000 Medicare and Medicaid patients in 2016 (Ross, STAT News, 3/15; Olson, Minneapolis Star Tribune, 3/15; Whitman, Modern Healthcare, 3/15; Rosin, Becker's Hospital Review, 3/17; Richert, MPR News, 3/17; Ross, STAT News, 3/17; Richert, MPR News, 3/16). 

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