Should People in Iowa Pay for Spacious Rooms in Northeastern Suburbs?
In part I of this post, I took on the conventional wisdom that an aging population is driving U.S. hospital bills higher. The truth is that a combination of spending on new construction and hi-tech equipment pushed the nation’s hospital bill to $648.2 billion in 2006 —up 7 percent from 2005. The uptick was part of a trend: since 2000, outlays for hospital care have climbed anywhere from 5.2 percent (2000) to 8 percent (2003) each and every year. As a result, by 2006, spending on hospitals represented nearly one-third of the $2.1 trillion we shelled out for health care that year.
In recent years, much new construction has been designed to house new technology or upgrade amenities rather than add to the number of hospital beds. There is just one exception to that rule: the suburbs.
“When hospitals do increase inpatient beds,” Paul Ginsburg, the president of the Center for Health System Change notes, “the new construction typically occurs in rapidly growing suburbs, where well-insured patients live.”
In its March 2008 report, the Medicare Payment Advisory Commission
supports Ginsburg’s observation: “much of the added capacity is located
in suburban areas and in particular specialties, raising the
possibility that health care costs will increase without significantly
improving access to services in lower income areas.”
While having a hospital in every suburb might seem like a convenient
idea, the fact is that we cannot afford to duplicate multi-million
dollar equipment that is available in a large city 45 minutes away.
Here, I am not talking about emergency equipment or trauma centers; I’m
talking about positron emission tomography (PET) machines and neo-natal
intensive care units.
Redundant equipment can lead to over-treatment that isn’t just expensive, but also hazardous for patients. Research reveals that when ICUs for newborns are installed in suburban hospitals, they are over-used—putting infants at risk.
Other studies suggest
that infants who actually need an ICU fare better when transferred to a
regional NICU with an average daily census of fifteen infants or more.
Granted, out West, there are states where hospitals are too far apart.
But in the Northeast, on the West Coast, and in many areas in the
South, research shows that we already have too many hospitals—leading
to supply-driven over-spending and over-treatment. (“Build the beds and
they will come.”)
Finally, when it comes to complicated surgeries like organ transplants
(which suburban hospitals are now doing), we know that outcomes tend to
be better at large hospitals where surgical teams do many surgeries
every year: practice makes perfect.
Nevertheless, in places like Florida, “even small community hospitals
feel compelled to do things to prevent people from going to other
cities or towns nearby,” says Steve Gressel, senior vice president of
Skanska USA Building of Atlanta. “We see a lot of OR expansions,”
Gressel told “Southeast Construction”
last month. “Surgery is the lifeblood of a hospital,” Gressel added.
“Two-thirds of revenue is generated directly or indirectly by the OR.”
The hard truth, as Ginsburg explains, is that hospitals are eager to
expand capacity to house “what they have identified as the most
profitable services.” So MedPac’s March 2008 report shows that the
number of hospitals with neo-natal intensive care units has been
rising—despite the fact that research published in 2004 showed that 97
percent of the U.S. population already lived within a reasonable
distance of two or more hospitals with a neo-natal ICU.
And once the units are built, the only way to pay for them is to use them, even though, according to a study
published in the New England Journal of Medicine, when “infants with
less serious illnesses are admitted to ICUs . . . vulnerable newborns
are subjected to more intensive diagnostic and therapeutic measures,
with the attendants risks of errors and iatrogenic complications
[complications caused by medical care] as well as impaired
family-infant bonding.”
The Hospital as Hotel
In 2006, the Washington Post described
what sounded like a very nice resort: “Walk past the free valet
parking, past the woman at the front door welcoming visitors with an
attentive smile 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,” the Post noted. “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,’ John Fitzgerald, president of Inova Fair Oaks told the Post. ‘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 noted, “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. At the end of the day, it’s about taking care of
patients.’”
HealthBeat reader Lisa Lindell, the author of 108 Days, the
story of her husband’s struggle to survive an accident which left him
severely burned agrees: “When you’re at your darkest hour, ‘good
service’ is no longer defined by valet parking, posh suites, waterfalls
and gleaming marble. What you care about is staffing ratios.” There is
“no legislative mandate with regard to nurse/patient ratios” in U.S.
hospitals, Lindell notes.
As it happens, Lindell works as an accountant in the construction
industry, and so, in a comment on HealthBeat, she offers an insider’s
look at constructions costs: “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 the
community, and I note how all the press releases boasting of these
state-of-the-art works of art always make some reference to ‘serving
the community.’
“But 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.’”
Lindell is right: much of the spending on amenities has nothing to do
with promoting healing. And the costs are passed on to you and me in
the form of higher insurance premiums and higher Medicare co-payments.
If patients in some part of New Jersey or Westchester County, New York
want valet parking or very spacious private rooms, should taxpayers in
Iowa pay for it? Iowa’s citizens shell out the same percentage of their
paychecks for Medicare, yet Medicare spends half of much, per capita,
on Iowans as it spends in regions where health care is more intensive,
more lavish—and far more expensive. (Medicare spending is adjusted for
differences in local prices, the overall health of the population in
different states, race and age.)
While hospitals that vie for the most affluent patients raise the price
on every pill and every pillow in order to cover the cost of the
mahogany, the marble, the waterfalls and the spacious rooms, patients
in less affluent areas suffer. “As some of the Washington area’s
hospitals expand at record levels and add amenities,” the Post observed,
“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.”
Lindell sees this happening in her city: “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 are 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.”
If I recall correctly, a recent article in the magazine, “Modern Healthcare,” pegged hospital construction at about $30 billion last year. That includes new hospitals, expansions of existing hospitals and renovations of obsolete space. I’m not sure if it includes the equipment like MRI machines, etc.
I have no problem with adding capacity in fast growing suburbs. A growing population presumably needs more beds unless there was significant excess capacity before. Equipment wears out. Facilities become obsolete and have to be renovated or replaced. That said, I agree that procedures like organ transplants should be done in regional centers that can support enough volume to assure high quality care, and we have way too much imaging equipment.
It’s a reasonable argument to suggest that we could easily get by with fewer frills. My question is how much money could be saved by eliminating the frills, not paying for “never events” and finding CEO’s willing to work for a modest fraction of what most are currently paid? I suspect that all three of those factors combined amount to less than 1% of healthcare costs. I think it would be more productive if we focused our efforts on changing the incentives in the system to drive out excess utilization by both hospitals and doctors and try to bring about convergence in practice patterns between the most efficient providers and the high utilizers. Right now, neither hospitals nor doctors suffer any adverse consequences from high utilization. Indeed, it’s more profitable for them to practice that way. If I were one of those Iowa taxpayers, I would be more upset about paying for the aggressive practice patterns at UCLA or Massachusetts General than for marble and waterfalls in the lobby at some new hospital in NJ or Westchester County, NY.
It is also much more difficult than it should be to close unneeded hospitals in markets like New York City or smaller cities like Buffalo or Detroit that have lost significant population over the years. Unions resist closing because it would mean job losses, and the nearby community resists because they like having their hospital nearby. In NJ, since the state is in such bad financial shape, we are finally starting to let some of these weaker hospitals in markets with a surplus of beds fail and close. It’s about time.
The hospital building boom
It’s primarily a consequence of the fee-for-service reimbursement system that promotes procedures and high-end imaging.
MedBlog Power 8
04/09/2008 – 04/16/2008Next revision: 04/16/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
Barry–
Of course we agree about the need to weed out the overtreatment.
But, as we know, this will take time and money. To do its job, a Comparative Effectiveness Institute where unbiased researchrs and doctors do head to head comparisons of products and services will need full funding.
And as the UK’s NICE demonstrates, you need to take the time to consult with people–doctors in the field, patients, the manufacturer (or surgical group)behind the new or more expensive product, the competitors who will offer evidence that it is not as effective . . .
In the meantime, delcaring a mortaorium on building new hospitals or surgical centers ) and on renovating hospitals and centers-) unless a medical need can be shown– is not time-cosuming.
It takes political will. That’s about it. Maine has done it.
According to the MedPac study, very little of the “renovation” going on in the hospital industry now has to do with replacing obsolete equipment or worn-out plants.
It has to do with “upgrading” in cosmetic ways and upgrading to the newest hi-tech equipment –even though the equipment the hospital already has is far from obsolete.
In the suburbs, no one is assessing whether the community “needs” a hopsital. (See Money-Driven Medicine where planners talk quite openly abou this.)
The reasons for building are three-fold:
a) many suburbanites like the convenience of having a hopsital only 20 minutes away so that relatives can visit and because “parking is easier”;
b)some object to city hospitals because “there are too many foreign doctors and minority health care workers” and city hospitals are located in “dangerous neighborhoods where I don’t want to park my car”
and
c)the suburban hospitals have more amenities –more spacious rooms, nicer carpeting, rooms have better views, etc.
But none of this has much to do with promoting the community’s health. And, as a nation, we can’t afford it.
If the stated reports of 2 trillion a year are accurate (healthcare spending), one percent of that is 20 billion. According to Modern Healthcare, in your own post, Barry, we’re spending 30 billion on construction, that would put the construction alone at more than 1%. (PS what’s happening in my city isn’t because hospitals are “worn out.”)
Having said that, I wholeheartedly agree with you, we have the change the way the system “works.” And you’re addressing, whether you realize it or not, is the lack of standardization in healthcare, another wasteful and expensive habit. The lack of consistent treatment, care, diagnosis, heck even billing codes are not universal from facility to facility. That’s an interesting and very good idea, centralized specialized facilities for things like organ transplants. It’s actually a very good idea. Again this would require more sophisticated IT and in healthcare IT is decades behind…because they’re spending their money on pretty and useless things instead. Wouldn’t it be great if the the best minds at Fed Ex got involved in reforming healthcare? They could do it. Put the organ transplant hospital in Memphis.
I’ll offer one anecdote, which is more or less evidence based medicine, but done informally within one hospital system for whom I consulted. They determined their most common Medicare DRG, were for (congestive) heart failure. I can’t remember now if it accounted for 45% of ICU stays or of all admissions. It was, I believe, ICU, or that’s at least what they examined.
They went over the criteria for keeping a CHF patient in ICU, and found that there was a rule that if a patient was on either of two potent IV drugs, they stayed in ICU. I’m not talking about things with near-instaneous effect, such as adenosine or sodium nitroprusside, that clearly justify continuous observation.
They determined that if the _only_ intervention that kept a patient in the ICU was IV Lasix or Natrecor, the patient could safely go to a stepdown unit, as long as nursing was kept alerted, via pagers, that the patient needed to be checked frequently. This change does not appear to have affected morbidity or mortality.
Incidentally, some “frills” may have subtle medical reasons. I understand that when private rooms are designed into a hospital, the additional cost isn’t that great. Having private rooms (and assuming proper handwashing and the like) has sometimes been shown to reduce nosocomial infections.
It can also help with badly needed sleep. The last several times I’ve been in a hospital, my roommate was loudly delusional.
Lisa & Howard —
Thanks for your comments.
Lisa,
Yes, the MedPac report confirms what you have seen in your city– we’re not replacing “worn out” hospitals and technology.
(The truly “worn out” hospitals who treat poor patients cannot afford to reubild–and can’t get the loans they would need.)
They’re re-building because hospitals are competing,, with a combination of frills and hi-tech, for more affluent patients.
This is what the Harvard Business School’s Michael Porter describes as “ruinous competition”–hospitals are going into debt, spending money they don’t have, on expansions that will not, in the long run, increase the value of that hospital in its community.
(For anyone who has read Porter’s book–I don’t agree with Porter’s solution to the problems, but, in many ways, he understands the ocre problems in our health care system very well.
Howard–
The whole question of private rooms is hard to decide.
They are more expensive largely because it means building twice as many bathrooms. (In rooms with two patients, there is one bathroom.)
IN my next post, I will talk about the hospital that built a new hospital to replace the old one “largely in order to turn it into an all-single room hospital” (this is a paraphrase) according to the CEO.
Does it make sense to go to the expense of replacing an entire hospital just to make it all private rooms??
I doubt it.
I certainly think some seriously ill patients need private rooms either because they are a) dying –and certainly deserve privacy with their families
or b) are in great pain, delusional, or in other ways would greatly bother, and add to the anxiety of any patient in the room with them. (The situation you describe.)
On the other hand, when I had each of my children I was in a double-occupancy room. In one case, I enjoyed the other woman’s family (they could have been a movie!); in the other case I found her and her famliy somewhat annoying.
But it certainly didn’t hurt my health. And because the births went smoothly and my babies were okay, I had no need for a private room. I as just very, very happy that the babies were okay–and that I was not longer in labor.
In most countires in Europe, private rooms are the exception, not the norm.
Mabye this goes back to the idea that in Europe, people are more tolerant of each other than we are . . .
But I do think that in a lot of cases (from appendectomies to knee replacements) people don’t
really need private rooms.
That said, If we can build new hospitals with all private rooms without a much greater expense, that’s fine with me. I have no idea what twice as many bathrooms cost. . . .
Lisa??
“They are more expensive largely because it means building twice as many bathrooms. (In rooms with two patients, there is one bathroom.)”
Personally I think all rooms should be private rooms. You are correct, building “twice as many” bathrooms would add considerable costs. Why can’t you have two private rooms that share one bathroom?
REGARDING THE HOSPITAL BUILDING BOOM
One of the reasons I find it so difficult to take progressive policy wonks seriously on health care reform is that they seem utterly incapable of honest and informed analysis. A typical manifestation of that intellectual handicap …
MedBlog Power 8
04/09/2008 – 04/16/2008Next revision: 04/16/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
Have I mentioned that I have worked in over a dozen hospitals and not one wasn’t under some sort of construction. I bet you could walk into almost any hospital and ask, could you point me to the ongoing construction, and someone would point you there.
Lisa & Dr. Matt–
Thanks for the comments.
Lisa — I think that you can’t have two rooms and one bath because the same affluent, well-insured Americans who are not willing to share a room with each other definitely don’t want to share a bath.
I just wonder why affluent Germans see nothing wrong with sharing a hospital room and we do?
Public sector insurance in Germany does not offer private rooms. Private-sector insurance,which is more expensive and offers more amentities (but no better care) does.
Yet half of all affluent Germans (earning over roughly $75,000) choose the public sector insurance. I talked to a 40-something German oncologist about this (he’s on the public sector insurance) –he couldn’t understand why we all want private rooms. . . .
I definitely think that someone who is seriously injured, or in serious pain, as your husband was, needs a private room–which is why hospitals need a mix.
Though at one point in my father’s life, he was terribly burned over the entire upper half of his body and was in a hospital room with another burn patient who was also in very serious condition. They were barely aware of each other.
Dr. Matt– Actually hospitals didn’t do much building in 1990s (though I agree that the edifice complex seems to be a running theme in our hopsital system.)
But the degree of building that is going on now hasn’t been seen since the late 1960s. . .
Lisa & Dr. Matt–
Thanks for the comments.
Lisa — I think that you can’t have two rooms and one bath because the same affluent, well-insured Americans who are not willing to share a room with each other definitely don’t want to share a bath.
I just wonder why affluent Germans see nothing wrong with sharing a hospital room and we do?
Public sector insurance in Germany does not offer private rooms. Private-sector insurance,which is more expensive and offers more amentities (but no better care) does.
Yet half of all affluent Germans (earning over roughly $75,000) choose the public sector insurance. I talked to a 40-something German oncologist about this (he’s on the public sector insurance) –he couldn’t understand why we all want private rooms. . . .
I definitely think that someone who is seriously injured, or in serious pain, as your husband was, needs a private room–which is why hospitals need a mix.
Though at one point in my father’s life, he was terribly burned over the entire upper half of his body and was in a hospital room with another burn patient who was also in very serious condition. They were barely aware of each other.
Dr. Matt– Actually hospitals didn’t do much building in 1990s (though I agree that the edifice complex seems to be a running theme in our hopsital system.)
But the degree of building that is going on now hasn’t been seen since the late 1960s. . .
MedBlog Power 8
04/09/2008 – 04/16/2008Next revision: 04/16/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
MedBlog Power 8
04/09/2008 – 04/16/2008Next revision: 04/16/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
Truly a helpful post. I have signed up for your newsletter. We shared your informative article with our readers, thank you for your efforts to keep us all informed.
What an important discussion about the other cost of healthcare! Our group is moving into the direction of evidence-based design, and this discussion is relevant to healthcare facility design and construction. We better rethink our approach.
Thanks.
I wonder what % of health care spending goes to physician salaries – not “services”. The reason that I ask this is that “services” includes all the overhead costs of running a practice.
The AMA says that physician salaries only accounts for 10 to 20% of medical costs – don’t know if this is true or not.
If we suppose that physician salaries accounts for 15% of medical costs, then even cutting physician salaries in half – a more Draconian measure than most would envision – buys us only/less than one year’s respite.
I personally think that reductions in fees paid to physicians has resulted in increased medical costs due to “churning” or; seeing more patients, doing more procedures, ordering more tests that can generate revenue, etc.
I would also point out that over the last 10 years, physicians salaries have not kept pace with inflation yet medical costs have outpaced inflation.
I don’t think the solution to our problems lies in reducing physician incomes but in other more fundamental reforms.