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Hospitalization costs continue to increase

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by Jan K. Allen

SBJ Contributing Writer

The costs of hospital care and procedures have risen in this decade, although the increase in some areas may not be as great as some people think. Charges are directly related to increased costs of providing service and are affected by a number of factors, according to Larry Pennel, senior vice president and chief financial officer for Cox Medical Centers.

Price increases during the last five years at Cox have been across the board, in direct relationship to the annual cost-of-living index, Pennel said.

Except for a small number of procedures, generally referred to by the industry as "loss leaders," which have been kept low, Cox tries to attune price increases with the annual inflation rate of 3 percent to 4 percent.

All prices are subject to the marketplace, however, according to Pennel. "The consumer has an impact."

A number of other factors that can affect pricing are not necessarily tied to the cost-of-living index. In the last few years, health maintenance organizations and preferred provider organizations have entered the arena. HMOs and PPOs negotiate a discounted rate for members, which is good news for participants, but it can be bad news for other patients.

If the difference is not made up in volume, it has to be spread among the remaining users and their respective insurance carriers, according to local care providers.

Amy Shellhart, administrative director of human resources and marketing at Columbia Hospitals, cites personnel, suite rental, equipment and materials costs as the basis for setting prices. Columbia uses a formula to take all these factors into consideration when pricing a procedure.

Shellhart stated many procedures have been made more affordable due to technological advancements which require less recovery time and thus lower costs.

The other side of the the coin, according to Pennel, is that high-tech equipment is expensive, and the cost of acquiring and maintaining the equipment is ultimately passed on to the consumer.

Other unforeseen factors such as the introduction of a new, expensive drug may adversely affect pricing on some treatments, Pennel stated.

Secondary factors, such as the tremendous change in the volume of services, have an impact of costs.

"The way we utilize health facilities has changed dramatically," Pennel said.

It used to be that a person with a knee problem would just buy a cane and learn to deal with the pain. Now people routinely use knee surgery to relieve the problem and improve their quality of life.

Hospitals have to balance costs with keeping up with technology and providing services that are in demand. But they also try to emphasize and promote wellness, according to Craig Peabody, vice president at St. John's Regional Health Center.

The cost for mammography screening at all three major hospitals has remained relatively low over the last six years.

Peabody said the hospitals want to take out the economic factor and encourage women to seek the life-saving test.

According to the Missouri Department of Health, facility charges at Cox were $30 for the procedure in 1992 and maintained the same charge in 1996. Today the charge is $33.66.

St. John's offered a base charge of $35 for the same screening in 1992 and increased to $36 in 1996, the report read. The charge remains $36.

Doctors Hospital's base charge for mammography was $61 in 1992. After becoming part of the Columbia system, the procedure was dropped to $35 in 1996. Today the facility charges $46.75.

In examining the state report on facility charges for diagnostic dilation and curettage (D and C), Cox received $1,293 for the procedure in 1992, and $1,430 in 1996. The charge is $1,600 today. St. John's garnered $1,094 for the same procedure in '92, $1,275 in '96, and the fee is now $1,450. Doctors Hospital charged $2,004 in 1992, then Columbia dropped it to $1,390 by 1996. Today's facility charge at the hospital is $1,335.

The facility charge for a hernia repair at Cox cost the patient $2,096 in 1992, $2,250 in 1996 and costs $2,650 today. St. John's charged $1,599 in 1992, $1,719 in 1996, and the current price is $1,968. Doctors Hospital charged $1,701 in 1992. Columbia charged $2,190 in 1996, and the price is $2,201 today.

There were no major jumps over this period in any of the procedures analyzed. The decrease from the 1992 figures for Doctors after it became Columbia can be attributed to the volume on which the larger facility operates, according to Wade Evans, network development director at Columbia.

While technology, such as the use of the laproscope, has reduced healing time, the highly specialized equipment is more expensive than previous methods, so the net result doesn't always mean a big savings to the patient, Evans pointed out.

Likewise, although increased volume spreads the cost and helps stabilize prices, the surge in this country toward an aging population and a greater number of ailments will put a greater demand on medical services, which tend to drive prices up due to supply and demand.

The final and perhaps most potentially adverse effect to average patient costs stems from government programs. According to Pennel, approximately 60 percent of Cox patients receive either Medicare or Medicaid treatment. St. John's has about 55 percent to 57 percent of its patient load from this sector, Peabody stated. Evans estimated the percentage at Columbia is about 33.

For some procedures the federal government has refused to raise or even lowered the benefit allowed. Increased costs to the hospitals are ultimately passed along to the paying patients.

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