Health systems weigh technological advances against high equipment costs

Since its installation, it has been used to perform 3,895 exams, as of Dec. 12.

But the scanner didn’t come cheap – it cost about $1.2 million.

St. John’s plans to devote between 10 percent and 25 percent of its Springfield campus budget for fiscal 2007, which began July 1, to new technology and upgrades. Major pieces of equipment included in that budget are digital mammography units, priced at $1.2 million, and echo/vascular upgrades, at about $450,000, according to Media Relations Director Cora Scott.

Officials at CoxHealth, meanwhile, estimate that the health system will have spent about $7.5 million on clinical technology in 2006. Expenditures this year have included new radiology suites and new imaging equipment in that department, Health Care Planner Phil Readinger said.

While health care providers are cognizant of technological advances, they also must consider that technology isn’t inexpensive, and the cost must be factored into decisions to add new equipment.

Price vs. projected benefit

The process for adding technology at both St. John’s and CoxHealth, is complex.

A proposal for a new piece of equipment can originate from anywhere – a physician who’s noticed something in a journal or a vice president who has attended a trade show. Ideas are submitted to each hospital’s technology adoption committee, which conducts research, weighs the equipment’s price against its benefits and determines if it “fits the goals” that a hospital has been aiming to achieve, Readinger says.

The priority in decision-making often dances between a piece’s price and the projected benefit it would provide patients.

“We also try to balance that with being one of the first,” said St. John’s Hospital President Jon Swope. “We feel a strong obligation to provide the latest and greatest technology for our patients.”

Driving up costs?

To be sure, some critics watch hospital spending with a careful eye, expressing concern that new technology is purchased primarily as a status-setter, regardless of whether the expenditure will drive up the cost of health care.

Andrea Croley, co-owner of Croley Insurance, acknowledges that concern, but says she sees the cost offsets ultimately pushing down cost of care, in most cases, which lowers insurance costs for employers.

“It may cost more for the procedure, but certainly what used to be a seven- to eight-day hospital stay, now you have procedures that are being done technologically that are allowing those employees to come back to work on a much earlier basis,” she said.

Both Swope and Readinger agree that there are outcomes that occur to make up for costs of new technology.

“If it prevents one or any number of patients from having to go through invasive procedures because of its ability to diagnose and screen our potential problems, that goes a long way in helping to offset that cost,” Swope said.

There’s always an attempt to break even on purchases, Swope said, as with any financial decision at a business. In health care, however, that can’t always happen.

“In every decision, you try as best as you can to determine the number of patients that will use or need this piece of technology; what will be enough to at least allow the organization to break even?” he said. “The reality of our business in health care today is there are some areas where that does work, and there are some areas where it doesn’t, just because of the nature of the payer mix in the different service areas.”

Invaluable outcomes

Croley notes that there’s a tendency in the general public to look at the cost of technology without weighing its outcomes, as well. Those outcomes – a saved life, or improved quality of life – can’t be priced.

“It’s not always going to lower your cost,” she said. “As a matter of fact, sometimes it will increase your cost. But the question is, even though the cost is more, will it give that individual a better quality of life? And most often, the answer is yes.”

Croley cites a need for more emphasis by health systems on educating patients about technology so that they can make the best decisions for their care. Many insurance carriers are beginning to post information about technology on their Web sites and are working to involve everyone – from the doctor to the patient to the engineer who created the equipment – in deciding if a procedure should be done, she said.

“We need to get better cooperation of treatment in a full cycle of care,” Croley says. “The system we have right now is great, but we can make it better by working more on an integrated level.”

Certificate of Need

Aside from the checks-and-balances systems hospitals impose on themselves, state government is there to regulate spending, too, most notably in Missouri’s Certificate of Need program.

Among its reviews of other expenditures, the program’s Missouri Health Facilities Review Committee requires hospitals to submit an application for approval before purchasing or upgrading major medical equipment costing $1 million or more, according to program Director Thomas Piper.

The committee spends up to four months learning about the proposed technology and its projected utilization rate and determining if there’s already ample capacity in the region, based on population.

“There’s a public expectation that the hospitals have an obligation to the public to be very transparent about the process, to be very responsive to the community it serves,” Piper said. “The community has a strong vested interest.”

To take that interest into account, the committee allows the public to submit information or comments about any review.

Piper points out that small businesses, especially, have a strong interest in hospital expenditures, because health care costs are increasingly cutting into their competitive ability.

Though the program has been in place in Missouri since 1979, efforts are made every year to change the program by limiting what it can review in regards to hospital spending. Piper says he expects a number of proposals to come up next year, including one that will ask to remove high-tech equipment from committee review.

“Many physicians would rather that high-tech equipment not be reviewed,” Piper said.