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 control
has given hospitals virtually every construction dollar they've asked for in
the past decade, according to a Sunday Gazette-Mail analysis.
The state Health Care Authority is supposed to determine if
proposed new construction or renovations are necessary, in order to prevent
expensive duplication of services. But since 1990, the authority rejected less
than 4 percent of the money requested by hospitals for construction and
equipment. It approved more than $1 billion in spending.
Meanwhile, the authority has experienced a surge in new
requests 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 money
to keep up with the latest technology and replace aging buildings. But some
question whether all this spending is leading to higher medical bills, which
make health insurance more expensive for everyone.
"When you spend $50 [million] or $60 million in a community to
expand services, the community has to pay for it," said Greg Smith, chief
executive of Mountain State Blue Cross Blue Shield, the state's largest health
insurer. "We've got to find some way to get control of capital expenditures in
'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 for
hospital staff might eat up more of a hospital's budget, but with a shortage of
urses and doctors in the state, they can't cut wages and compete.
The Legislature created the Health Care Authority in 1983 to
control health care costs, mainly by preventing duplication of services between
hospitals in the same area.
Competition might drive down the cost of clothing or food, but
competition in health care actually can increase costs, Smith aid.
example — two neighboring hospitals buy the same piece of expensive equipment,
but there are only enough patients to justify one. The patients in that
community 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 and
does not duplicate other services. Hospital officials must file a CON request
and prove their case to the Health Care Authority.
The process itself is expensive and difficult, and might deter
hospitals 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 it
takes to apply until they determine they fulfill the standards," she
Once an application is made, the authority almost never rejects
"If a hospital can prove that it can be paid for, that's really
the major standard for approval," Smith aid.
"And that's easy to prove. You
just pass it on to the private sector, and have them pay for it."
Hospitals often hire experts and lawyers to justify the need
for a project. Most of the time, no one from the community attends to represent
patients when hearings are held.
One exception is physician-turned-lawyer Richard Lindsay, who
is fighting a request by Charleston Area Medical Center for a $30 million
computer system. Lindsay said that, even with his experience as a malpractice
lawyer, he has trouble fighting a CON request.
"It's hard for the ordinary consumer, or for me, frankly, to
know 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 one
another asked the Health Care Authority for permission to build new buildings
worth $400 million.
Stonewall Jackson Memorial in Weston dropped its proposal for a
ew 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 receive
Hospital officials argue that West Virginia's equipment and
buildings, on average, are about 9 percent older than the national average, and
eed replacement. Also, many facilities were built 30 to 40 years ago, when
federal money was available for construction. It is hard to retrofit these
older buildings for new technology and more outpatient services, those
Finally, the public demands high-tech service, even in small
hospitals, said Steven Summer, president of the West Virginia Hospital
Association. One reason managed care failed is because it tried to limit
patient choice, he aid.
"The public said very clearly that we're not willing to accept
that [low] level of service," he aid.
Summer wants to see the government actually pay hospitals the
full cost for treating patients covered by Medicare, Medicaid, Workers'
Compensation and other government programs. If that happened, then hospitals
wouldn't have to charge private insurance companies so much.
Lindsay has another idea, as well. He'd like hospitals to milk
more life from their existing infrastructure. He's not convinced that the shiny
ew equipment and buildings really improve care.
He said he once was treated in an English hospital. The floors
creaked, the television set was ancient, he said, but the patient care was
among the best in the world.
"Everybody assumes, when people at a hospital say they need
something, it's for medical or scientific reasons," Lindsay aid.
"A lot of
times, 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 doctors
in other states have opened free-standing "surgi-centers" away from hospitals
to do profitable, routine surgeries — but not in West Virginia, at least not
yet, 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's
will be allowed to do so.
Chambers said the Health Care Authority is beginning to take a
harder look at CON requests. She said hospitals are asking for an unprecedented
amount of money.
"I don't think there was the level of scrutiny [before], as
there is now," Chambers aid.
"Is it partly driven by the fact that we're
eeing 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 how
many more people we're going to have uninsured than we already do?
Last year, authority board members considered a six-month
moratorium on new CON applications, but rejected the idea.
The authority is beginning to make the following deal with CON
applicants — we'll approve your project, if you agree not to increase what you
charge patients by too much. Called "benchmarking," the idea is to make similar
kinds of hospitals charge similar rates by tying rate increases to how a
hospital compares with its peers.
Also, the authority is trying to create a map of health-care
ervices 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 services
or close completely in order to cut health-care costs in the state, Chambers
But hospital consolidation, like school consolidation, is hard on local
"One of the big questions now is: If we're going to be building
ew 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 people
have to travel to get care?"
Lindsay said the Legislature could pass clearer laws that spell
out what is required to build a new facility or renovate a building. He also
aid the make-up of the authority itself could be changed to include more
But he doesn't expect any change soon. Powerful political
interests — construction companies, some labor unions and the hospitals
themselves — want more construction, more new equipment. Meanwhile, consumers
Smith, the insurance executive, said he doesn't have an easy
answer but that an answer needs to be found.
"I'm not here to tell you which hospitals should or shouldn't
have their requests granted," he aid.
"All we're trying to point out is that
it may be more of a burden than we can stand."
To contact staff writer Scott Finn, use e-mail or cal 357-