No End In Sight to Rising Healthcare Costs

I thought healthcare providers were working to decrease costs. But because I gave birth this year, my baby boy is more expensive than other children born in years past.

I’ll back up. In July I gave birth to a very handsome little boy. I’m thrilled to be a mom, but now I fully understand how expensive children are. I’m not just talking about diapers and formula; I’m talking about the cost of healthcare. You see, my son was a breech baby so I had to have a C-section. In the weeks that followed his birth I had a slew of routine appointments with my pediatrician, a visit with the X-ray lab, blood work, and more tests. I got a clean bill of health for my son, thankfully, but I also got several other bills from all these providers—it seems all these visits were not covered by my health insurance.

I, like so many other people in the U.S., now have a high-deductible health plan. In the past, insurance covered me for most general issues; however, now I have to cover a large chunk of change myself before the insurance kicks in. Now, in theory, by having this type of plan consumers will be more inclined to shop around for the best price. Well, I’m a very educated healthcare consumer, and I can tell you that you don’t shop around when you are giving birth.

Nor do you shop around for the best price when you have a newborn baby. Moreover, I have a good friend who is afflicted with stage four brain cancer and she isn’t looking for bargains either. She is going to the hospital that can provide her with the best treatment.

For the mounting bills that I and my friend are receiving, we have more than a few culprits to lay the blame onto: the economy, the hospitals, the insurers, our employers, even our physicians. But no matter who you blame, the fact is that consumers are paying more and the trickle down effects are hitting hospitals, as evidenced by a couple of reports from the rating agencies, Moody’s and Standard & Poor’s.

Last week, Moody’s released a report on hospital admissions. In what they describe as “an historical anomaly that isn’t likely to be reversed any time soon,” it seems that the rate of growth for patient admissions to not-for-profit hospitals is actually declining. They chalk this up to a bad economy. But that’s just a blanket term; it’s not really the economy, but the people who are affected by the economy—and these days they can’t afford to pay out of their pockets.

"Hospitals are largely reimbursed on a per-case basis by governmental and private payers, creating a direct link between all volume indicators and hospital financial performance," said Moody's Senior Vice President Lisa Goldstein, author of the report. That’s a fair and true statement, but it leaves something out. Unless the consumer goes to the hospital, then the payers don’t actually even get involved.

 
I don’t think that declining admissions will actually surprise any hospital CFO, but the findings are worth knowing. Here are a few highlights:

• Since 1991, the rating agency found slower growth from one year to the next as the median growth rate declined to -0.02% in 2009 from 1.03% in 2008.
• They predict the poor admissions rate trend will likely continue into 2011.
• They also predict that admissions may become less important under a bundled payment system.

 
Also of note, thanks to fewer patients coming through the doors and the erratic predictability of reimbursements ratings agencies are more inclined to give hospitals lower investor ratings.

If a possibly lower investor rating and declining hospital admissions aren’t enough to grab your attention, perhaps data released in the S&P Healthcare Economic Composite Index will be.

According to the report, the average per capita cost of healthcare services covered by private insurance and Medicare programs rose 7.32% over the 12 months ending August 2010. Hospital and physician claims for patients covered under commercial health plans were the hardest hit, as claim costs associated with commercial health plans rose 8.66% while Medicare claim costs for services rendered by hospitals and physicians rose the least at 5.08%.

That’s a pretty large and steady increase for an industry that’s supposed to be tightening its belt. Now if you consider that the average consumer will receive a 2%-3% raise this year (if they’re lucky), then you can see that the numbers aren’t showing a bright financial future for patients or providers.

With the current rate of per capita cost of services rising by more than double what consumers will see as increases in their own paycheck, patients simply will not be able to afford to pay their share for care much longer. That’s an equation that isn’t healthy for anyone’s bottom line.