California's hospital costs are rising far more rapidly than the national average, largely because of the state's worsening nurse shortage and an overuse of costly medical technology, according to the latest in a string of Blues plan reports scrutinizing hospitals' role in the nation's healthcare cost crisis.
From 1998 to 2001, inpatient costs in California rose at an average annual rate of 11.3%, almost twice the national average of 5.9% and nearly four times the general inflation rate of 2.9%, according to the study, jointly released last week by the national Blue Cross and Blue Shield Association, and Blue Shield of California.
The study also found California's average cost per admission was 45.3% higher than the national average, even after adjusting to allow for the possibility the state's hospitals treat more severe cases. Only New Jersey had a higher average cost per admission, at 52.4% above the norm.
"While hospital costs are speeding forward throughout the country, California is in the passing lane," said Joel Hay, associate professor at the University of Southern California and a lead researcher for the report. "Consumers and employers are seeing major increases in their healthcare costs as a result of these trends."
The findings are an offshoot of a 400-page report published by the Blues association last month that labeled hospital consolidation and the proliferation of new technology as the two factors most threatening to the affordability of healthcare nationwide (Oct. 28, p. 6). The Chicago-based trade group said it would release other state-specific hospital cost reports as its member plans request them.
As for California, researchers attributed much of the cost increases to a dire shortage of nurses, a problem that is being compounded by the state's strict mandates on minimum-staffing ratios. California ranked 49th in nurses per capita in 2000, and its number of unfilled nursing positions is expected to grow to more than double that of any other state by 2005. The cost consequences could be serious, given that every 1% increase in unfilled nurse positions leads to a 1% rise in hospital expenditures, the study concluded.
A more readily controllable cost driver in California, however, is hospitals' rapid adoption of pricey and often duplicative medical technologies, such as catheterization laboratories and MRI machines, the study found.
In 2000, the cost per discharge exceeded $47,000 in 13.5% of California cases, compared with just 5% of cases nationally. The state's larger percentage of high-cost cases likely reflects a tendency by hospitals to shepherd more patients toward high-tech procedures to recoup their hefty capital investments, Hay said.
"Hospitals know the best way to maximize their technology is to keep it fully utilized," Hay said. As a result, "a lot of worried (healthy) people are laying down huge chunks of money for elaborate procedures (such as full-body MRI scans) that often have no proven medical value."
Jan Emerson, spokeswoman for the California Healthcare Association, agreed the labor shortage is a key driver behind the state's rising hospital costs, adding that many health systems now are having to grant nurses pay raises of 25% or more. But she took issue with the report's conclusion about technology use, calling it an attempt to shift public attention away from insurers' double-digit premium increases. "Patients are demanding these lifesaving technologies, and physicians are prescribing them. So what are hospitals going to do?" Emerson said. "It's very irresponsible for (the Blues) to make statements clearly singling out hospitals without adequate evidence."
Indeed, Blues plans have been turning an increasingly critical eye on hospitals' role in rising healthcare costs. In September, Blue Cross and Blue Shield of Minnesota released an in-house report warning policy leaders that the state's unprecedented hospital construction boom could greatly inflate insurance premiums (Sept. 23, p. 6). And Cobalt Corp., parent of the Wisconsin Blues, is working on its own hospital cost study due out soon.