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Is the Mayo Clinic a Model Or a Mirage? Jury Is Still Out.

Even in Rochester, a city of 85,000, Mayo serves a higher-income echelon than the town's other hospital, Olmsted Medical Center. Just 5 percent of Mayo's hospital patients receive Medicaid, an exceptionally low figure, compared with 29 percent at Olmsted, where officials say they do more to help people in the community apply for Medicaid.

Officials at Mayo and the other model centers reject the argument that their cost figures are explained mostly by demographics. Gundersen's Thompson points to the high rates of smoking and drinking among many Wisconsin residents. "The stereotype that we're all bachelor Norwegian farmers out there working till we're 95 isn't exactly right," he said. Gundersen vice president Kathy Klock chimed in, "Have you ever been to Packers stadium?"

And Mayo chief executive Denis Cortese played down the screening effect of the Medicare premium and said he was untroubled by the low rates of Medicaid patients at the clinic. "Why don't they come? I don't know," he said.

To counter the doubters, Elliott S. Fisher, the Dartmouth professor who oversees the Medicare research, published a piece in the New England Journal of Medicine stating that poverty and health status accounted for only about a third of the spending disparities among communities. "Yes, there are pockets of poverty," he said in an interview. "But despite claims to the contrary, that does not explain most of the differences across the United States."

The Cost Question

Driving across the Upper Midwest, clinics owned by Mayo, Gundersen and Marshfield pop up as reliably as signs for convenience stores. Over time, the three facilities and several others have carved out quasi-monopolies in Wisconsin, Minnesota and northern Iowa, with each hospital surrounded by affiliated clinics in smaller towns. The centers and their admirers say the country should organize itself into similar regional networks to improve coordination and efficiency between primary-care doctors and hospitals.

But such regional dominance also gives the networks pricing power, meaning any savings could be canceled out by higher rates the networks could charge insurers. A 2005 study of federal employee insurance by the Government Accountability Office found that Wisconsin cities such as La Crosse were charging insurers the highest rates. Mayo also charges high rates for the many people paying out of pocket. It draws so many wealthy patients from abroad that it has set up a concierge area to help translate and to exchange currencies; a Middle Eastern sheik has built a hotel, the tallest building in town, to house patients from overseas.

Those charges, to insurers and private patients, raise questions about whether the Dartmouth data capture the full cost picture. The models' leaders say they charge their private payers so much because they are vastly underpaid by Medicare's regional formulas. But many experts see it the other way around: If Mayo did not have such a large payroll and such gleaming facilities, its costs would be lower and Medicare would come closer to covering them.

"We agree that [the models] practice good, parsimonious care," said Len Nichols, a fellow at the New America Foundation. "What they don't show is that they're giving us the lowest imaginable cost they can get. And they won't do that until they're forced to."

In his office high above Rochester, Cortese disputes the notion that Mayo is anything but lean to the bone. "Our costs are our costs," he said. "It costs us a certain amount to hire our cardiologists, our radiologists, all our services. Everything we've got here is what we have to pay for."

Stepped-Up Lobbying

Mayo has cultivated an apolitical image over the years, but with health-care reform looming, it recently banded with Gundersen and Marshfield to promote the "high-value" model they all follow. To supplement Mayo's lobbyist in Washington, Cortese started making frequent trips to the nation's capital.

In July, Mayo and a dozen other institutions fired off a letter that made Washington take notice. Under Gundersen's letterhead, the institutions opposed the "public option" in the House Democrats' bill. They also called for an overhaul of Medicare rates to reward "high-value" centers -- paying hospitals based not on the number of procedures, but on their cost-efficiency and health outcomes.

Republicans seized on the letter, noting that the public option was opposed even by hospitals Obama had praised as models. "I'm surprised he holds these groups up because you knew they were going to oppose what he was trying to do," said Rep. Paul D. Ryan (R-Wis.).


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