Just How Low-Cost is the Mayo Clinic?

The idea that putting everyone into something like a Mayo Clinic will save oodles of money underlies almost everything being discussed in Washington. But it is based more on wishful thinking than on any real evidence. Now Peter Nelson at the Center of the American Experiment offers a paper that should put this fantasy to rest for a while.

Mr. Nelson agrees that the Mayo Clinic provides very high quality care. But he says if you look beyond the price controls of the Medicare program, it is by no means low cost. He writes, “In Medicare, the government sets prices and, as a result, the prices in the Dartmouth data reflect national Medicare policies and do not reflect the price of health care services negotiated between private health plans and providers more generally.” Indeed, “Relative to other Minnesota providers, most evidence pegs the Mayo Clinic as a high-cost provider.”

 How does he know this? Mr. Nelson writes:

Last week, Minnesota Community Measurement unveiled a new Web site that provides the most concrete public data on the price of various physician procedures in clinics across Minnesota. Specifically, the Web site provides the average negotiated price from Minnesota’s four largest health plans for 105 procedures offered in a physician’s office. Based on this data, the Mayo Clinic is often the highest cost provider relative to other Minnesota providers.

Based on the data in the table, Mayo costs far more than other Minnesota providers. Of the 69 procedures, Mayo’s price is the highest for 11 and among the top five highest for 48. On average, Mayo’s price was 220 percent higher than HealthEast and 180 percent higher than Park Nicollet.

He goes on to provide some caveats, but concludes, “Nonetheless, the fact that every tiered health plan in Minnesota places Mayo in the high-cost tier suggests strongly that Mayo’s total cost of care is higher relative to other Minnesota providers.”

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