Having just slogged through the dueling cost studies of the hospital industry and the Blue Cross and Blue Shield Association, not to mention a variety of other analyses, I am left with some interesting conclusions and one central question.
Once I recovered from the blizzard of charts and academic gobbledygook-I never want to see the words "econometric" or "regression equation" again-I think I can try to summarize what is really going on, based on "empirical evidence," of course.
What's really behind all this research is a reluctance of anyone to carry a fair share of the weight for the recent resurgence of double-digit growth in overall health spending. Everyone is charging more for their products, from medical equipment manufacturers to physicians to hospitals to health plans. Costs are only going to rise ever more dramatically as the baby boomers retire and ever more exotic medical technology comes on line.
Each of the studies makes some valid points. The Blues study, released last fall, found that inpatient hospital spending grew an average of 5.9% annually from 1998 to 2001, roughly twice the rate of inflation, and accounted for a third of overall healthcare cost increases. About a fifth of the rise in inpatient spending came from expensive new technology such as cardiac catheterization procedures and diagnostic imaging, and almost another fifth came from hospital consolidation. The Blues claims that every 1% rise in hospital market share results in a 2% rise in inpatient costs. I very much doubt that a scientific journal would accept that precise a conclusion based on the evidence used, but I am not a scientist.
With equally dubious certainty, the American Hospital Association-Federation of American Hospitals study released last month denies any link between consolidation and hospital cost increases. Anyone who has looked at the pricing strategies of Tenet Healthcare Corp. and several other hospital systems can find all the evidence he needs of the use of market power to raise hospital prices.
On the other hand, hospitals make a strong case that health plans themselves have benefited from market consolidation. The Blues' own recent report found that health plans' 2002 profit margins grew even as the percent of premium revenues devoted to paying claims dropped (March 3, p. 15). Large employers report that their health plan premiums jumped 15% this year, while health plans have reported profit surges.
The hospital associations also reference a Centers for Medicare and Medicaid Services report that contends hospitals' share of rising healthcare costs is declining. The growth rate fell from 8.3% in 2001 to 7.4% in 2002, and is expected to be 5.5% in 2003.
Rising utilization and increased use of medical technology, which are the largest components of increases in inpatient and outpatient costs, are everybody's problem, of course. Health plans readily pay for these services, after all. This leads to my central question: Why don't hospitals and payers get together and actually do something about rising healthcare costs, rather than just pointing fingers?
The studies document the excessive costs of inefficient care. Physicians order too many tests and use the most expensive technology, even when less expensive and perhaps more efficacious procedures are available. Too much money is spent on emergency care and too little on preventive care. Too much money is wasted on inefficient record-keeping and administration.
So rather than commissioning huge studies, how about trying to work together to solve the problem? Hospitals and health plans worked together on Cover the Uninsured Week. How about a Cut Unnecessary Healthcare Costs to Pay for Needed Care Week?
What do you think?
Write us with your comments. Via e-mail, it's [email protected]; by fax, dial 312-280-3183.