Health Beat
Study: Crisis in hospitals' costs has multiple factors
Boston Business Journal - by Allison Connolly
Hospitals say they are stressed, but what is the real cause of the malady? Is it the nursing shortage, crowded emergency rooms or perhaps the Balanced Budget Act of 1997, which cut Medicare reimbursement rates?
The answer is that all of these things contribute to the problem, hospital executives say.
Each is an element of "variability," affecting every hospital's bottom line in different ways. As we know, some hospitals are turning a profit, while others are in danger of closing.
Bay State hospitals are accused of having too much fat. The state logs the highest health care costs in the country. Some believe that because Boston is home to the world's most renowned teaching hospitals, and because most insured residents choose to visit those rather than their local hospitals, we are unable to curb costs.
And, some believe that if we had more doctors here, spending would drop.
The Massachusetts Medical Society commissioned a study to determine whether more doctors means lower cost. And it found that a hospital's having more doctors does not effect spending.
The study, conducted by Boston's Howell Group, found there are other, more crucial elements of variability that contribute to higher medical costs.
They are: the number of inpatient admissions; the number of surgeries performed; the number of outpatient visits; and the percent of the population over 65 years of age.
"It's a lot more complex than people want to make it," said James Howell, who co-authored the study.
Howell's group compared seven variables in hospitals in 11 states between 1992 and 1998 to determine what was driving costs.
The group used statistics from four data bases: The Health Care Financing Administration (HCFA), the U.S. Dept. of Labor's data on family expenditures, the American Hospital Association's total expenditure data and the tally of Medicare spending for those years. There were some surprising results, Howell said.
According to the HCFA, we spend an average of $4,887 per person each year on health care, while the rest of the country spends an average of $1,127.
While Massachusetts has 3.4 doctors for every 1,000 people, as opposed to the national average of 2.2 doctors, about 20 percent of our doctors don't practice; they are in research or work for biotechnology companies.
And, according to American Medical Association data, Bay State hospitals spend 30 percent more on outpatient costs than the national average.
"I don't know why our outpatient costs are out of line," Howell said. He suspects that outpatient costs are high because as technology gets better, more people can be treated in an outpatient setting.
And, in the last decade, hospitals invested a lot of money in outpatient service, believing it would be the real money-maker and that more volume would mean more revenue.
But, as they are beginning to realize, that isn't always the case.
"The hospital system is in a paradigm shift," Howell said. "People are still learning."
If Bay State behaves, it might get invited
Speaking of spending, Harvard University's John F. Kennedy School of Government held a daylong symposium last week to discuss health care costs and how insurers, providers and politicians can help manage them.
The event was called "A Regional Approach to Healthcare in New England," but Massachusetts politicians were conspicuously absent.
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