A few days before a state report ranked its flagship facility as the priciest in Denver, HealthOne vowed to chop its charges by an average of 5% to 10%.
Its timing was no coincidence. Executives expected HealthOne's charges to be among the highest in Colorado, and they planned a pre-emptive strike, said Zane Todd, HealthOne's vice president of marketing and strategic planning.
However, Mr. Todd contends that the state report didn't trigger the system's decision.
Data compiled at the end of March showed surprising results: HealthOne, created by last year's merger of Swedish Medical Center and P/SL Healthcare System, carved $4 million from its costs in its first six months.
Executives didn't expect the merger would save money this year, Mr. Todd said. Now, they expect to save $24 million over three years instead of the $15 million they had estimated.
A reduction in its charges seemed appropriate.
"This move would bring us to the middle of the pack, I would guess," Mr. Todd said. "I don't think it's a profound move, but I think it's an unusual one."
In 1992, 746-bed P/SL had the highest charges of any acute-care hospital in Denver, the state report said. The report, released last week by the Colorado Health Data Commission, lists average charges per inpatient stay, estimated payments received and estimated expenses. It's based on data published last year by the Colorado Hospital Association.
P/SL's charges per inpatient stay averaged $12,475 adjusted for case mix. The former Humana Hospitals followed with average charges of $11,272.
P/SL's partner, 328-bed Swedish, placed sixth at $9,841.
Tertiary services pushed up costs at P/SL, Mr. Todd said. P/SL hospitals, which were owned by American Medical International until 1991, also carry higher charge structures that date from their for-profit days, he said.
HealthOne will reduce its charges by Sept. 1, the start of its next fiscal year. It's still deciding how much to cut particular charges.
The cuts will cost it about $5 million to $6 million next year, Mr. Todd said. HealthOne's annual revenues total about $700 million. About 15% of its patients pay full or discounted charges instead of the prices negotiated by managed-care or government payers.
One criticism hospitals have leveled at the state report is that case mix doesn't account for all differences in charges. Payer mix, severity of illness and service mix also explain why charges vary, they said.
The data commission first planned to release only estimates of average payments received by hospitals, said Reid Reynolds, its director. That information wasn't readily available in the CHA report, Mr. Reynolds said. But the commission decided to release a variety of cost measures after hospitals complained that a single measure was inadequate.
The measures released-charges, payments and expenses-tell the same story. Hospitals that rank high in one area typically rank high in the other two. That means that charges alone might be a good measure of which hospitals cost the most, Mr. Reid said.