Hospital Costs Keep Climbing

An article by Jordan Rau of Kaiser Health News describes how hospital costs keep climbing amid healthcare reform. State laws have inadvertently given hospitals even more leverage to demand higher prices. California requires HMOs to have networks that offer all major specialties reasonably close to where patients live. Lisa Rubino, president of Molina Healthcare of California, told Kaiser Health News that the law makes it difficult for insurers to drop big hospitals from their networks. “You have to work with them or make a strategic decision to get out of the area because they can dig in,” says Rubino.
Hospital rates in the Bay Area now are among California’s most expensive, propelled upward by prominent hospitals and networks, including Sutter Health, Stanford Hospital & Clinics and John Muir Health, according to private and government data.
Statewide, hospital prices have been rising rapidly for years. For privately insured patients, the cost of a stay has increased annually by an average of 8.5% over the past five years while the cost of an outpatient visit has grown by 9.6% a year, state records reveal.
High prices don’t always equal superior care. Quality measures for some of the Bay Area’s most prestigious hospitals, including Stanford and John Muir, show that in some instances, less expensive competitors perform as well or better in their basic responsibilities, such as avoiding infections and high death rates for patients in intensive care. However, few employers are willing to limit workers to plans with less expensive hospitals. “When we propose alternatives, one of the very first question employers of all sizes ask is what affect the change will have on employees and their dependents,” said Jennifer Walsh, benefit practice leader at Woodruff-Sawyer & Co. in San Francisco, to Kaiser Health News. Many employers, instead, make their workers pay the increased costs.
A few employers are trying to stop the upward march of hospital prices. CalPERS, the state pension fund, estimates it has saved $252 million over five years by kicking some of the costliest hospitals and doctors out of several of its HMO networks in 2005. The savings amounted to about 3.1% of premiums, CalPERS says. For more information, visit www.kff.org.