The cost of health insurance will double in the next five years, experts predict, if health-care costs keep rising as they have been. By 2008, a family policy in West Virginia could cost $18,000, and one in three could be uninsured. Why is this happening? As part of our ongoing examination of the cost of health insurance, this installment in the Everybody at Risk series focuses on one of the drivers of health-care costs: the state's skyrocketing hospital spending and the agency that was created to control it.
A state agency charged with keeping medical costs under controlhas given hospitals virtually every construction dollar they've asked for inthe past decade, according to a Sunday Gazette-Mail analysis.
The state Health Care Authority is supposed to determine ifproposed new construction or renovations are necessary, in order to preventexpensive duplication of services. But since 1990, the authority rejected lessthan 4 percent of the money requested by hospitals for construction andequipment. It approved more than $1 billion in spending. Meanwhile, the authority has experienced a surge in newrequests for hospital construction — almost $700 million this year, up from$186 million only four years ago. Hospital officials say they have to spend the additional moneyto keep up with the latest technology and replace aging buildings. But somequestion whether all this spending is leading to higher medical bills, whichmake health insurance more expensive for everyone. "When you spend $50 [million] or $60 million in a community toexpand services, the community has to pay for it," said Greg Smith, chiefexecutive of Mountain State Blue Cross Blue Shield, the state's largest healthinsurer. "We've got to find some way to get control of capital expenditures inthis state." 'It's hard for the ordinary consumer'
Capital projects are only one part of a hospital's expenses,but they make up a part that state regulators could control. Salaries forhospital staff might eat up more of a hospital's budget, but with a shortage ofurses and doctors in the state, they can't cut wages and compete.
The Legislature created the Health Care Authority in 1983 tocontrol health care costs, mainly by preventing duplication of services betweenhospitals in the same area. Competition might drive down the cost of clothing or food, butcompetition in health care actually can increase costs, Smith aid.
Forexample — two neighboring hospitals buy the same piece of expensive equipment,but there are only enough patients to justify one. The patients in thatcommunity now have to pay for two pieces of equipment. So the Legislature created a Certificate of Need (CON) process,where hospitals have to prove that their proposed new spending is necessary anddoes not duplicate other services. Hospital officials must file a CON requestand prove their case to the Health Care Authority. The process itself is expensive and difficult, and might deterhospitals and others from attempting unnecessary projects in the first place,aid authority chairwoman Sonia Chambers.
"They generally will not go through the time and expense ittakes to apply until they determine they fulfill the standards," sheaid.
Once an application is made, the authority almost never rejectsit.
"If a hospital can prove that it can be paid for, that's reallythe major standard for approval," Smith aid.
"And that's easy to prove. Youjust pass it on to the private sector, and have them pay for it." Hospitals often hire experts and lawyers to justify the needfor a project. Most of the time, no one from the community attends to representpatients when hearings are held. One exception is physician-turned-lawyer Richard Lindsay, whois fighting a request by Charleston Area Medical Center for a $30 millioncomputer system. Lindsay said that, even with his experience as a malpracticelawyer, he has trouble fighting a CON request. "It's hard for the ordinary consumer, or for me, frankly, toknow what to do," Lindsay aid.
"You are at a disadvantage to the hospitals,which have done this work for 20 years." Older equipment, facilities
At one point this year, four hospitals within 50 miles of oneanother asked the Health Care Authority for permission to build new buildingsworth $400 million. Stonewall Jackson Memorial in Weston dropped its proposal for aew hospital on Interstate 79. West Virginia University's Ruby Memorial in
Morgantown received permission to build a $75 million addition. And the major hospitals in Clarksburg and Fairmont want brand-ew facilities along I-79. If each were built, they would be within a 10-minute
ambulance drive of one another, and cost more than $300 million. The HCA tried to convince those two hospitals to merge, but
they couldn't find a way to work together. Now, only one is expected to receiveits request. Hospital officials argue that West Virginia's equipment andbuildings, on average, are about 9 percent older than the national average, andeed replacement. Also, many facilities were built 30 to 40 years ago, when
federal money was available for construction. It is hard to retrofit theseolder buildings for new technology and more outpatient services, thoseofficials say. Finally, the public demands high-tech service, even in smallhospitals, said Steven Summer, president of the West Virginia HospitalAssociation. One reason managed care failed is because it tried to limitpatient choice, he aid.
"The public said very clearly that we're not willing to acceptthat [low] level of service," he aid.
Summer wants to see the government actually pay hospitals thefull cost for treating patients covered by Medicare, Medicaid, Workers'Compensation and other government programs. If that happened, then hospitalswouldn't have to charge private insurance companies so much. Lindsay has another idea, as well. He'd like hospitals to milkmore life from their existing infrastructure. He's not convinced that the shinyew equipment and buildings really improve care.
He said he once was treated in an English hospital. The floorscreaked, the television set was ancient, he said, but the patient care wasamong the best in the world. "Everybody assumes, when people at a hospital say they needsomething, it's for medical or scientific reasons," Lindsay aid.
"A lot oftimes, they just want it." An unprecedented amount of money
Only half of all states have a Certificate of Need process.With so few projects being rejected, is it even necessary? Chambers said the process works. For example, groups of doctorsin other states have opened free-standing "surgi-centers" away from hospitalsto do profitable, routine surgeries — but not in West Virginia, at least notyet, because of the CON process. Also, two hospitals recently asked if they could offer open-heart surgery in Parkersburg, but because of the CON process, only St. Joseph'swill be allowed to do so. Chambers said the Health Care Authority is beginning to take aharder look at CON requests. She said hospitals are asking for an unprecedentedamount of money. "I don't think there was the level of scrutiny [before], asthere is now," Chambers aid.
"Is it partly driven by the fact that we'reeeing such a large dollar amount, and health-care costs and health-insurance
costs are going through the ceiling? And that I'm really concerned about howmany more people we're going to have uninsured than we already do?Yes." Last year, authority board members considered a six-monthmoratorium on new CON applications, but rejected the idea. The authority is beginning to make the following deal with CONapplicants — we'll approve your project, if you agree not to increase what youcharge patients by too much. Called "benchmarking," the idea is to make similarkinds of hospitals charge similar rates by tying rate increases to how ahospital compares with its peers. Also, the authority is trying to create a map of health-careervices for the entire state. Once completed, it could help determine whether
an area really needs a certain capital improvement. Some hospitals might have to change their mission, cut servicesor close completely in order to cut health-care costs in the state, Chambersaid.
But hospital consolidation, like school consolidation, is hard on localcommunities. "One of the big questions now is: If we're going to be buildingew hospitals, do we need to be consolidating some of them?" Chambers
asked. "It's a tough question. One of the concerns then is: How long do peoplehave to travel to get care?" Lindsay said the Legislature could pass clearer laws that spellout what is required to build a new facility or renovate a building. He alsoaid the make-up of the authority itself could be changed to include more
health-care consumers. But he doesn't expect any change soon. Powerful politicalinterests — construction companies, some labor unions and the hospitalsthemselves — want more construction, more new equipment. Meanwhile, consumersare disorganized. Smith, the insurance executive, said he doesn't have an easyanswer but that an answer needs to be found. "I'm not here to tell you which hospitals should or shouldn'thave their requests granted," he aid.
"All we're trying to point out is thatit may be more of a burden than we can stand." To contact staff writer Scott Finn, use e-mail or cal 357- 4323.