In Money-Driven Medicine: The Real Reason Health Care Costs So Much I talk about the nationwide hospital building boom—and ask two questions: Can we afford it? Do we need it?
In many regions, suburban hospitals have been reaching for big-city business. “What we have to do to maintain our position in the markets is to keep adding services,” explained Westchester Medical Center CEO Ed Stolzenberg. “That’s the whole reason we went into liver transplants.”
Did the resident of Westchester Country (just outside of New York City) need a local hospital doing liver transplants? Just how many transplants would a Westchester hospital do? Would such patients be better off at a high-volume medical center in Manhattan where “practice makes perfect”?
Those questions didn’t seem to come up. The CEO knew that transplants would raise the hospital’s image.
Across the nation, as not-for-profit hospitals set out to invest in new construction and equipment, decisions seemed to be market-driven—but not necessarily driven by the local population’s medical needs. Instead, they were powered by the hospital’s need for market-share.
In Phoenix, Roger Hughes, executive director of St. Luke’s Health
Initiatives, a Phoenix-based health care foundation, told me how
resources were allocated in his hometown. “Hospitals are rushing to get
into areas where the population is beginning to expand, thinking, ‘If
we don’t get in there, the other guys will beat us.’
“The land-rush mentality doesn’t always take into account planning for
the community’s needs,” Hughes added. “When it comes to breaking down
the health needs of the population by age and chronic diseases in order
to try to decide what mix of ambulatory, inpatient and home health care
will be required . . .” he observed, “This is not the game that
hospital executives are in.”
The game that they are in might be called “courting the well-insured
patient” with amenities that will attract well-heeled patients. In
Gastonia, North Carolina, for instance, Gaston Memorial Hospital has
built a 120,000-square foot maternity ward which featured a two-story
glass atrium with a 60-foot waterfall, a children’s library where
children can play and 52 private rooms with Internet access, whirlpool
baths and sofa beds for expectant dad.
All of which sounds lovely. But one has to wonder, who will ultimately
pay for the waterfalls, the atrium and the whirlpool baths? The answer
of course, is “everyone.” As hospitals pour hundreds of millions into
new construction and hotel-like amenities, insurance premiums,
deductibles and co-payments soar.
I finished writing Money-Driven Medicine at the beginning of 2006.
Nearly two years later, hospitals continue to break ground—and the
prices that we all must pay for hospital care continue to spiral. And
this has raised some eyebrows at the Medicare Payment Advisory
Commission (MedPac), the independent commission that advises Congress
on Medicare spending, according to David Durenberger.
Durenberger, a former senator and founder of the National Institute of
Health Policy, wrote about MedPac’s interest in hospital construction
today, in the commentary that he publishes under the NIHP banner
(www.nihp.org). He begins by pointing out that from 1990 to 2000
non-federal hospital construction averaged about $10 billion a year.
Since 2000, however spending on construction “has risen at a steady
pace every year reaching over $30 billion in 2007. Modern Healthcare’s
annual survey shows that currently, as much as $60 billion is being
spent on hospital construction design…And all of this is occurring
while hospital inpatient admissions have been relatively flat. [my
emphasis] So this year MedPAC proposes to [try to] understand why this
is happening and to advise Congress whether anything could/should be
done about it.”
Durenberger goes on to ask all of the right questions: “How much is
improving/replacing outdated facilities, or keeping up with growing
populations and/or the need to deploy health information technology?
How much is [being invested in] a medical arms race as hospitals
compete with each other and with specialized facilities for well
insured patients desiring access to new technology and amenities? How
much of this is in response to [perverse] incentives in the current
payment system to increase utilization? Where are the incentives to
increase efficiency, productivity and safety? ”
Unfortunately, I’m afraid that I, like Durenberger, know the answer to most of those questions.
It is not that I object to amenities. It’s just that I know that there
are many things that our hospital system needs including health care
information technology that could greatly reduce errors and infections;
more trauma centers in some states; and more palliative care services
in hospitals coast to coast so that more patients will get the pain
relief and counseling that they sorely need at the end of their lives.
I like waterfalls. I like gourmet food. But if I were going into a
hospital tomorrow, I would be far more concerned about whether someone
was going to give me the wrong medication—and whether I might pick up
a potentially fatal hospital infection. These things happen in the
nicest hospitals with the prettiest views.
All of the things that our hospitals need require capital
investments—capital that we can’t afford to squander by building more
hospital rooms than we need (at a time when inpatient admissions are
flat or falling) no matter how nicely appointed those rooms may be.
Keep in mind, when it comes to hospital beds, supply drives demand.
Build the beds and they will come, along with the bills.
Paul Levy, CEO of BIDMC in Boston, estimates that new hospital construction, at least in the Boston area, costs at least $500 per square foot without the equipment. In this context, though the waterfalls make good journalistic copy as illustrative of frills, they probably get lost in the rounding as a cost factor.
As I understand it, there is a trend toward private rooms (vs semi-private previously), not because well insured patients demand them but because private rooms are safer – reduced chance of infections, medication errors and other mistakes. To the extent that there are surplus beds in a particular market (like New York City) it would be helpful if there were a better mechanism to insure that antiquated, obsolete or grossly underutilized facilities downsize or close thereby removing the associated costs from the system altogether.
The long term trend in the number of hospital beds per 1,000 population is down due to medical advances allowing numerous surgeries to be done on an outpatient basis or with a much shorter inpatient stay, medication eliminating the need for surgeries altogether, replacement of exploratory surgery with imaging, and the ability to do at least some surgeries in Ambulatory Surgery Centers (ASC’s) for 25%-30% lower cost than in a hospital setting. There are probably still too many beds in some markets. That said, there is nothing wrong with building more modern hospitals with private rooms and other improvements that will improve patient safety as long as outdated facilities are closed or converted to some acceptable alternative use.
My long term fear is that if we ever wind up with something like Medicare for All with government dictated prices, the massive inefficiencies in the current system will be locked into place as government payments allow even high cost providers to recover their costs plus a modest profit.
Maggie- You are correct.
This excess supply side hospital boom will bite us badly. It is painfully obvious to me and many others that we need to reduce demand in medicine through prevention,home care,hospice,etc.
Ironically I AM in favor of hospitals spending more $ on arts and other environmental features, ameneties,etc, that the hospitality/hotel industry has. I have worked on this for over 20 years! Adequate parking through valet services was copied from the hotel sector which many hospitals now have.We actually have a need to re-invent what a hospital actually is!
But the much bigger issue is too many hospitals-period. Clearly
economically not sustainable.No way.
Thanks again and
Be Well,
Rick Lippin
First, I do agree that private rooms actually may be economical. Infection control — and do remember the 13 Deadly Errors contain some infections — is easier.
There are several studies that show hospitals are immensely noisy places, which interfere with rest, which, in turn, interferes with healing. While I didn’t remember my wallet on my last urgent stay, I did have a pocket tool kit…and, after a bit of work when my roommate was asleep (and not loudly hallucinating), the TV speaker no longer worked. Pity. For some reason, it started working again just before I left.
Do watch the waterfalls. I worked on a building full of programmers, frightening as that may be, which had a waterfall in the atrium. The evaporation of the waterfall chilled the wall on the other side, which dripped constantly.
I couldn’t agree with you more. My husband spent 108 days hospitalized in one of our finest hospitals. Needless to say there were a myriad of problems. They “couldn’t afford” to adequately staff the facility or address any of the problems that were resulting in mistakes and setbacks to my husband further jeopardizing his life. I’ve watched, over the years, this health care system undergo major construction projects at all their facilities in this city. They brag about their new $92 million dollar vascular institute. $92 million dollars available to spend to develop a vascular specialty. This is on the heels of opening their brand new, state of the art burn unit, the same burn unit my husband was on and they couldn’t afford to take care of him (by the way, he had 100% insurance coverage.) You couldn’t pay me enough money to be a patient in their vascular institute. It’s nothing but PR and a waste of money. In this city we’re assaulted with their ad campaign of “What if…” in other words, they’re constantly asking themselves “What if….” to improve themselves. I’ve got a lot of “What if…” questions for them. What if you stopped spending money on construction and spent it on the delivery of quality care? What if you staffed the floor with one more nurse, just one more on the floor would have made an incredible difference, maybe they could attend to their patients instead of leaving humans to suffer in their own waste for hours on end. What if they assigned a more regular rotation of nurses to critical patients? This would have eliminated many complications, including the contamination (infection) spreading from one patient to the next. I could go on and on and I did in the book I wrote, “108 Days” but I couldn’t agree with you more and I’ve been yelling and screaming about this same issue for years. Keep up the good work.
Responding to Lisa, Howard, Rick and Barry —
(To see their comments on this post, please scroll down)
Lisa–
Your offer an outstanding first person account of the state of our hospitals. And your “what if’s” are excellent (i.e. What if you stopped spending money on construction and spent it on the delivery of quality care? What if you staffed the floor with one more nurse, just one more on the floor would have made an incredible difference . . .)
All of the research shows that the number of nurses per patient (and whether those nurses are actually free to care for the patients and are not bogged down in administrative work) is key to the quality of care.
Howard is probably right that rest and quiet is also important to healing, but if you are alone in a private room, and a nurse doesn’t come when you call, you may be in real trouble.
Surveys show that this is why many older people prefer to be in a semi-private room with one other patient. Even if the elderly person no longer has living relatives to visit him or her, the room-mate may, and those relatives can come to the older person’s aid and get a nurse in an emergency.
(Older patients who want a semi-private room are also likely to have spent some time in hospitals in the past, and have few illusions about staffing and quality of care.)
Rick and Barry– I agree that great views and art can lift the spirit, but we just can’t afford to build huge hospitals in the suburbs that duplicate services aleady offered by hospitals in a near-by city.
Instead, we need to spend the money upgrading the quality of care at those city hospitals (and rural hospitals). We are working with finite resources. If you spend money on one thing, you can’t spend it on another.
See my response to comments on my later post above (“Are We Willing To Accept A Two-Tier Hospital System”)
And thank you all very much for your comments–
mm
Responding to Lisa, Howard, Rick and Barry —
(To see their comments on this post, please scroll down)
Lisa–
Your offer an outstanding first person account of the state of our hospitals. And your “what if’s” are excellent (i.e. What if you stopped spending money on construction and spent it on the delivery of quality care? What if you staffed the floor with one more nurse, just one more on the floor would have made an incredible difference . . .)
All of the research shows that the number of nurses per patient (and whether those nurses are actually free to care for the patients and are not bogged down in administrative work) is key to the quality of care.
Howard is probably right that rest and quiet is also important to healing, but if you are alone in a private room, and a nurse doesn’t come when you call, you may be in real trouble.
Surveys show that this is why many older people prefer to be in a semi-private room with one other patient. Even if the elderly person no longer has living relatives to visit him or her, the room-mate may, and those relatives can come to the older person’s aid and get a nurse in an emergency.
(Older patients who want a semi-private room are also likely to have spent some time in hospitals in the past, and have few illusions about staffing and quality of care.)
Rick and Barry– I agree that great views and art can lift the spirit, but we just can’t afford to build huge hospitals in the suburbs that duplicate services aleady offered by hospitals in a near-by city.
Instead, we need to spend the money upgrading the quality of care at those city hospitals (and rural hospitals). We are working with finite resources. If you spend money on one thing, you can’t spend it on another.
See my response to comments on my later post above (“Are We Willing To Accept A Two-Tier Hospital System”)
And thank you all very much for your comments–
mm
Not for profit hospitals are at the heart of Tax abuse. Florida Hospital for example pays huge annual bonuses to its managers making the not-for-profit salaries more attractive than any commercial enterprises in our region.
Secondly, while they claim not for profit tax status, they build buildings that look like a Hyatt Hotel Resort. Who owns this building? Florida Hospital. Yet it was paid for by revenues from Medicare and other payers that were untaxed. They claim to be not for profit but they continue to profit by asset accumulation. Florida Hospital has billions in assets yet claims to be not for profit. I is a real racket. They are allowed to sell off there assets without paying tax on the gains. If you wonder why health care costs so much, perhaps you should follow the asset trail. IRS is finally looking at it. Florida Hospital would be a great place to start.