Yesterday, I wrote about the hospital-building boom and suggested that we may not need it—and more to the point, we may not be able to afford it.
In my description of how hospitals are adding costly amenities like waterfalls and all-private-rooms in order to woo well-heeled, well-insured patients, I suggested that the money might be better invested in computerized medical records or Level I trauma units. (In some parts of the country, trauma units are spaced so far apart that if you are in a car accident, there is a real danger that the unit will be too far away to be of any help.)
Barry Carol responded, agreeing that safety should come first, but also arguing that the private rooms help prevent infections. As for the waterfalls, he noted that “while they may make good journalistic copy as illustrative of frills,” given the high cost of hospital construction “they probably get lost in the rounding as a cost factor.” See his comment here.
Because Barry had raised a number of good points, and because the hospital boom is such a large and crucial subject, I decided to return to it today while responding to his comment.
Barry—
I’m afraid the waterfalls are more than good copy for journalists.. Similar amenities are being included in hospital construction across the country–and it adds up.
Here are a few examples from a 2006 piece in The Washington Post:
“Walk past the free valet parking . . . and into the light-filled
lobby, where soothing tunes waft from a baby grand piano and macchiatos
are brewed at the coffee bar…Only the patients in wheelchairs give away
that this is a hospital.
“All five of Montgomery’s community hospitals are in various stages of
expansion. As they increasingly compete with each other . .
.flat-screen televisions and CD players are standard in many rooms at
Montgomery General in Olney.
"We want [patients] to leave here and then brag about it," said John
Fitzgerald, president of Inova Fair Oaks. "There’s a competitive nature
to health care, and we want to be first. And part of that is the
service.
"This trend has its critics," the Post notes, "including industry
consultants who caution hospitals to remember that their primary
mission is to treat patients . . .Some hospital administrators, too,
are leery of overspending on frills. Brian A. Gragnolati, president of
Suburban Hospital in Bethesda, says: ‘I would rather put money into
nursing care and staffing and making sure our doctors are there,’ he
said. "At the end of the day, it’s about taking care of patients."
""As some of the Washington area’s hospitals expand at record levels
and add amenities, others don’t have that luxury.. . They are buckling
under the burden of caring for the uninsured, raising concerns about
widening disparities in health-care facilities.”
The May/June 2006 issue of Health Affairs offers a window into
the surge in the cost of hospital construction as hotel-like amenities
help drive up costs: : “Modern Healthcare magazine reports that costs
for completed acute care hospital construction rose from $9.2 billion
in 2000 to $13.0 billion in 2004, and costs for construction that broke
ground or was in the design phase increased from $30.8 billion in 2000
to $54.0 billion in 2004.”
The Health Affairs article continues by reporting on 1,008 interviews
done by the Center for Health System Change in sixty randomly selected
and nationally representative U.S. markets. The Center has been doing
these interviews every two years for ten years. In the latest round of
interviews, they asked questions that explored the kinds of
construction projects hospitals planned, had under way, or had recently
completed
First, the researchers confirmed the move to private rooms, but
questioned whether this was really about preventing infections:
“Although the movement to private hospital rooms partly reflects
concerns about infection transmission and patient privacy, by and
large, it reflects hospitals’ desire to provide a potentially costly
patient amenity to attract or maintain business.”
If you think about it many of the most serious infections acquired in
hospitals are not air-borne; they are transmitted by hospital personnel
who haven’t washed their hands, or by equipment that hasn’t been
cleaned properly. Being in a private room offers no protection against
these infections.
Here I would add that since very few insurers pay for private rooms,
when a hospital builds only private rooms it is turning itself into an
exclusive hotel for those who can afford it. Particularly if a patient
is seriously ill, and stays in the hospital for two or three weeks, the
extra $300 to $500 a night of a private room—plus a deductible and
co-payments for other items – is likely to be more than many
middle-class patient can shell out.
Shouldn’t private rooms be reserved for the sickest patients—those who
are in great pain or who are dying as well as those most susceptible to
air-borne infections? Shouldn’t rooms be assigned based on medical need
rather than ability to pay?
A 2003 Boston Globe article
points out that: "Some state regulators fear the move to single rooms
is creating a two-tier system where the wealthy reside on separate
floors with private rooms and the poor are placed in older doubles
…Several years ago, New York State public health officials denied a
request by New York Weill Cornell Medical Center to build more than 50
percent private rooms in its new hospital, said Susan Mascitelli, vice
president for patient services. . . Mascitelli said ‘they wanted a
single class of care for everyone.’”
In the Health Affairs piece, the interviewers also reported that they
were concerned that in some cases, hospitals were squandering scarce
health care dollars on “the construction of new and sometimes
duplicative general hospital capacity and specialty service
facilities…Hospital respondents often indicated that they needed to
build these new facilities to maintain or grow business that could be
captured by other hospitals. Competition also comes from
entrepreneurial physicians who have begun building high-profit cardiac
centers, orthopedic centers, and other specialty hospitals that don’t
have to offer the low-profit services that general hospitals offer
(i.e., trauma centers, burn units, ERs, and smoking cessation
clinics). Critics say that by concentrating on high-profit services
these physician-owned specialty centers “skim” the cream of a
community’s hospital business, leaving general hospitals to struggle
with serving a community’s needs.
The interviewers also suggested that the movement “to convert to
private rooms and build redundant full-service hospitals and specialty
facilities might represent a ‘medical arms race’ reaction in a number
of instances.” In other words, hospitals were not responding to the
community’s needs; they were competing for market share, and creating
excess capacity in the process.
In the end, we all will bear the costs of excess capacity in the form
of higher insurance premiums and co-pays—not to mention higher
Medicare taxes, deductibles and co-pays. Decades of research shows that
when there are more beds in a community, physicians fill them. If you
live in a town with extra hospital beds, you are more likely to find
yourself spending time in one of them. But patient outcomes in these
communities are no better—in fact, often mortalities are higher. I have
written about this here.
But as the interviewers in the Health Affair article point out, once
doctors and hospitals have spent the money on new construction, they
have to recoup there investment somehow: “There is concern that
hospitals and physicians could ramp up utilization within a given
population as they seek to cover the costs of renovated and expanded.”
A second 2006
Health Affairs article, titled “Could U.S. Hospitals Go The Way Of U.S.
Airlines?” paints an even more alarming picture of where hospital
spending and competition may be taking us.
The piece begins by drawing the parallel between the airlines and the
hospital industry, noting that industry deregulation has produced
low-cost specialty air-lines that focus only on the most profitable
routes. “Similarly, in the hospital industry, specialty hospitals have
emerged that can focus on the most profitable patients and do not have
to treat the uninsured or provide money-losing services. The new
specialty hospitals, like the new low-cost carriers, are not saddled
with fixed costs…and do not have to contend with excess capacity that
resulted from historical changes in demand.”
“New specialty airlines have forced older, full-service carries to cut
back on salaries and amenities and declare bankruptcy,” the article
continues. “If the hospital industry is placed in a similar position…It
could be forced to reduce capacity and close hospitals, particularly in
high-cost communities that serve the poor and underserved.
“Nurse-staffing ratios could be decreased, and facilities might not be
updated. General hospitals could also be forced to reduce services that
lose money. Just as airlines have abandoned unprofitable routes,
hospitals could abandon unprofitable patients. Burn and trauma units,
neonatal intensive care units, and AIDS clinics could become scarce
among hospitals that are struggling to survive. Struggling hospitals
also could reduce quality, which could adversely affect patient safety.”
Like the other researchers, the authors of this piece worry that if
current trends continue, we could wind up with a two-tier system: “It
is also likely that the hospital industry could become tiered—one
system with modern up-to-date facilities, some focused and specialized,
that serve the privately insured, and one poorer, underfunded, and
possibly publicly supported system that serves everyone else (Medicare patients,
the poor, Medicaid patients, the uninsured, and many of the chronically
ill); one system that dominates suburban areas with high income, high
employment, and extensive insurance coverage, and one that serves the
inner city, poor rural areas, and retirement communities.” [my emphasis]
How certain are you that when you’re on Medicare, you’ll have the extra
$300 to $500 a night to pay for a private room—plus $4,000 or so to
cover your deductible and all of the co-pays? (Medicare now charges a
$1,000 co-pay per hospitalization. You can be all but certain that
number will rise in the years ahead.)
Will you be able to gain admission to one of the new, all-private-room
exclusive hospitals that are being constructed today, or will you have
to settle for one of the ramshackle facilities in a poorer
neighborhood—a facility that is not likely to attract the best nurses
and doctors? Keep in mind: whether or not you can afford the luxury
hospital, you are paying higher insurance premiums today to help cover
the higher prices these hospitals charge as they expand.
Can we accept a two-tiered hospital system? Let’s see a show of hands.
I vote a vociferous NO.
I have travelled to nations, especially in Asia, where one’s “class” determines what floor and room you stay in at the hospital. That is IF you are lucky enough to get in with CASH payoffs! The rooms actually are named by class like in an airplane.(first class etc)
I find it to be an affront to all that I am as a doctor and as a citizen of a nation that is supposed to be a beacon of human rights.
Dr. Rick Lippin
Maggie,
A few comments on this.
First, I don’t have any problem with hospitals trying to please patients with good service. However, most of the time, hospital admissions are driven either by a referring doctor or result from an ER visit. As a patient, what I really want to know (and want my doctor to know) is how does the hospital rank on appropriate outcome metrics including infection rates? If I had a choice between a private room in a pretty new hospital that produced below average outcomes or a semi-private room in an older hospital that achieved better outcomes, I’ll take the latter, thank you, even though I can afford the private room.
On the subject of nurse staffing ratios, I thought these were governed by either law or regulation. If not, they probably should be, though hospitals can exceed the requirement if they like and if they think it adds value that will attract patients.
On construction, the figures you cited are not presented in any context. What percentage of the aggregate value of existing hospital physical plant does new construction represent? How much needs to be done just to update, renovate, modernize or replace outdated facilities? Where does the number of beds per thousand population stand relative to the state or region? Is the area population expanding rapidly (like Las Vegas) or shrinking (like Detroit or Buffalo). If it’s shrinking, hospital capacity should be shrinking with it.
With respect to excess beds and its possible impact on utilization, I think there is a lot that insurers could do to track utilization by referring doctor and hold high utilizers (relative to both the region and the nation) accountable or at least find ways to drive convergence in practice patterns toward results achieved in the most efficient regions.
On reimbursement, I don’t know why Medicare can’t lower reimbursement rates for procedures that it finds that it has been overpaying for, especially if new technology made it simpler, safer and less time consuming. Conversely, if there are services that are being underpaid like trauma, burn units, ER’s, etc., it should be possible to raise those rates. Just because a certain category of care was underpaid historically doesn’t mean that it has to remain underpaid forever.
Finally, on the two tier issue, I think the key here is how good or adequate is the lower tier. There is no question that the rich will always trade up. I really don’t have a problem with that. Looking ahead to a time when there are no longer any uninsured (and thus no uncompensated care), as long as everyone has access to decent care, if higher income people want to pay extra out of pocket for a private room, that’s OK with me. If Medicare can’t pay rates high enough to allow efficient providers to cover their costs (including their cost of capital) without relying on cost shifting to private payers, then it hasn’t done its job and it will have failed as a system. The same is true for Medicaid, which, as we have discussed before, should be folded into Medicare with the possible exception of long term care which probably needs to remain means tested.
Barry and Rick–
First, Barry, I don’t have a problem with “hospitals trying to please patients with good services either”–but the fact is that hospitals have finite resoures. If they spend money in one way, they can’t spend it in another.
The last time I checked, roughly half of the hospitals in the U.S. were operating in the red; most of the rest had only a very thin “profit margin” or “surplus”. Where, then did they get the money to build and expand?
During this current building boom they have been borrowing billions because interest rates are historically low. But there is a real danger that they have been doing what real estate developers often do when rates are low: build in order to borrow (rather than borrowing in order to build.) In other words, someone says “hey, rates are so low, we should borrow some money and build a monument to ourselves.”)
On nurses: Most hospitals need more nurses. They have raised pay for nurses, but still can’t get them becuase the working conditions in U.S. hospitals are so chaotic.
In other countries doctors and nurses are working with electronic medical records and computerized orders. Here, doctors are still scribbling orders on paper; sometimes those orders and prescriptions are mis-read. We have a very high rate of errors.
We also have a lot of paperwork because hospitals must put in claiims for resimbursement from dozens of private insurers. (In other countries there is far less paperwork). This means that nurses wind up doing administrative work, and don’t have time to check on patients.
See Lisa Lindell’s excellelnt comment on my post “The Hospital Building Boom: Can We Afford the Waterfalls?” below.
On construction, you note, rightly that “the figures you cited are not presented in any context. What percentage of the aggregate value of existing hospital physical plant does new construction represent . . .”
No one knows the answer to those questions (as the Health Affairs article I cite points out.) We used to have Certificate of Need laws that required a hospital or hospital developer to prove that the community needed more beds before building or expanding. Those laws now exist in only a few states.
People who make a nice profit designing and building and filling the beds in hospitals that may or may not be needed objected to the laws as too much government intrusion in our free market system. They ignored the fact that while in other markets excess capacity will go unused–and developers who over-develop will lose money (or at least the banks that lent to them will lose)– in the health care market, excess capacity will always be used.
IF the beds are available, doctors will hospitalize more patients simply it’s often more convenient (it’s easier to call in specialists to consult; the doctor doesn’t have to worry about late-night calls from a relatives who are watching the patient at home, etc.) But too often, the patient doesn’t really need to be in a hospital–and is being exposed to unncessary risks of picking up infections, falling victim to hospital errors, etc. Hospitals are dangerous places–especailly if you don’t really need to be there.
You raise a good question: “On reimbursement, I don’t know why Medicare can’t lower reimbursement rates for procedures that it finds that it has been overpaying ”
The answer: Medicare is controlled by Congress,which decides how much funding it gets. Congress, in turn is controlled, to an unfortunate degree, by lobbyists.
As Brian Klepper just pointed out on thehealthcareblog.com: “In 2006, American corporations spent $2.5 billion lobbying Congress, nearly $5 million per Senator and Congressional representative. More than $350 million of that figure came from the health care sector, and half of that ($180 million) came came from the drug, device and supply industries. All this information is handily cataloged at the excellent site, http://www.opensecrets.org.”
By and large, individual private insurers don’t have the clout to refuse to cover ineffective drugs and over-priced devices. They would lose customers. So they just follow Medicare’s lead, cover everything Medicare covers (or everything the lobbyists want Medicare to cover) and pass along the cost in the form of higher premiums. (Premiums have gone up 76% in the past five years.)
Finally, on the two-tier issue, I completely agree with you: “On the two tier issue, I think the key here is how good or adequate is the lower tier.”
Unfortunately, in the U.S. the quality of care in the bottom half of hospitals is pretty poor–as anyone who has spent a significant amount of time in a U.S. hospital recently knows. High rates of errors. Too little pain relief. Too many specialists treating a single patient–and not communicating with each other (or the patient) about what they are doing.
The conventional wisdom is that if you are going to spend time in a U.S. hospital today, you had better have an articulate, forceful and well-informed relative or friend with you, 24/7, to serve as your advocate.
Finally, it’s worth noting that in some countires the “bottom tier” that is available to everyone is very good. In Germany, for instance, very wealthy people are allowed to buy private insurance if they want to, but only 50% take that option since so many consider the govt’ supported care available to the general population perfectly fine.
Rick, I agree, rooms should not be assigned by ability to pay, but by need. (Then if there are private rooms left over, and wealthier people want to pay extra for them, fine. But first, those who are really suffering should have the private rooms.)
Maggie
Thxs for the discussion.I certainly don’t have all the answers.
But I do believe we need to rethink the ENTIRE concept of what a hospital actually is?(not very likely to happen)
Rick Lippin
Make no mistake – this is ALL about competition; no matter what else the hospital executives tell you. It all started about 15 years ago when we who work in hospitals were encouraged to call patients “clients”, “customers” or “guests” instead of what they were – with all the dedication, compassion and individual attention that term implies – PATIENTS.
Wonder what consultant first thought that one up; it has changed the very face of health CARE.
bev m.d.–
Thanks for your comment.
What you say about how hospitals were suddenly encouraged to call patients “clients” or “customers” reminds me of Regina Herzlinger’s objection to the term “patient” in her widely-read book “Market-Driven Healthcare.” (1992)
Herzlinger is, as you probably know, a major advocate of “consumer-driven” medicine and she objects to the word “patient” because she thinks it suggests a passive consumer, patiently waiting an hour for the doctor to see him or her, then patiently listening to what the doctor says, etc.
But, in truth if you look up the origins of the word, you discover it has nothing to do with describing the patient/doctor relationship. “Patient” refers to the patient’s relationship with his or her own body.
The word is derived from the Latin “Patientem” which means “bearing or enduring without complaint.” As the American Heritage Dictionry defines the word, a patient is someone capable of facing pain “with calmness,” while “awaiting an outcome or result.” In other words, the patient shows dignity and forebearance in the face of the suffering that flesh is heir to.
And that image of the patient as a fellow human being, bearing up as well as he can, elicits the “dedication, compassion and individual attention” that a doctor (not a businessman, not a retailer) brings to the project.
Maggie;
People like Regina H. are looking at the term solely from the consumer’s (patient’s) point of view, in trying to shift the balance of perceived “power.”
I am speaking from the care-giver’s point of view – that is, we were taught that care of the patient is a sacred trust which goes way beyond a mere customer transaction. I believe the business types who didn’t understand this and worse, persuaded the care-givers to their point of view, have unwittingly severely damaged the quality of medical care in intangible ways – because I am going to go much further out of my way for a patient than I am for a customer. It’s just a totally different attitude. They know not what they did. The whole thing is ineffably sad.
I know this is an older post but it’s worth revisting. We already have a “two tier” system and the quality of care at the top tier is poor, but those in the top tier have access. The quality of care in the lower tier is poor, and becoming scarcely available unless you’ve got the money, YOU have the money, in your pocket.
Barry, I don’t have a problem with hospitals trying to please patients with good service, either. I wish they would. When you’re at your darkest hour, “good service” is no longer defined by valet parking, posh suites, waterfalls and gleaming marble. Somebody mentioned the staffing, no, there’s no legislative mandate with regard to nurse/patient ratio’s. I think Medicaire has guidelines but they are woefully inadequate. The state of California now has legislative ratio’s, brought forth by the National Nurses Organizing Committee and they’ve been working hard to provide the same in every state. It didn’t pass in my state and I tried to help them.
I work as an accountant in the construction industry, and I live in a city with a major health care industry, quite possibly the largest in the country. It’s nothing short of obscene the amounts of money pouring into the “Hospital Building Boom.” There’s nothing wrong with growth and meeting the needs of their community, and I note all the press releases boasting of these state-of-the-art works of art always make some reference to “serving the community.” Nobody in my community cried out for a 90 million dollar vascular institute. Nobody in my community displayed a desperate need for custom imported marble. I made a comment to a co-worker of mine with regard to part of one large-scale project, I said: “You know, you and I are paying for this.” He said: “Oh, this isn’t even any part of the patient areas, this is the faculty room.” I watched 60 Minutes a couple Sunday’s ago and they did a segment on Remote Area Medical. A non profit organization initially established to provide basic medical services to developing nations. They were in Knoxville Tenneesee for a weekend providing medical care to working class American’s, a lot of whom have insurance. With quality care out of reach to middle class America, the very backbone of our country, just who exactly is filling all the beds in these new towers? Could it be we’re experiencing longer hospitalizations as a result of medical errors, infections, etc? That certainly drives up the revenue.
And finally, my local news did a story this week airing the stark contradiction right here in our community. The mega-health care organizations have major construction projects happening all over the city. Yet in the low income areas, they featured one hospital that had gone into bankruptcy and there’s no bulldozers and cranes underfoot. The physicians working there took it over and struggle to keep it open. One problem is they don’t have the buying power of the big boys, they have to pay more and get reimbursed less, and they are the one’s serving the community. Additionally, one of the mega-organizations shut down another local hospital by playing dirty with vendors and insurance companies. It was all over the news. The profit needs to be removed from the American health care system. If we can’t provide preventative and basic medical care for sickness and injury to our citizens, then eventually we won’t have a society. It’s self inflicted annihilation. Keep the capitalist system for elective procedures. As a country, we should be ashamed of our health care industry, I know I am.