As Utah health-care costs spiral ever higher, government investigators are asking tough questions about the hows and whys.
Their findings, along with media accounts chronicling their probes into Utah's health-care system, form the pieces of a complex puzzle illustrating the driving forces behind skyrocketing health-care costs.On a national level, Congress, the General Accounting Office, the IRS, the U.S. Department of Justice and the Federal Trade Commission are scrutinizing health-care providers tosee if they are breaking the law. The U.S. Department of Justice is consulting with Utah attorneys on the Utah investigation into local health-care services.
As Utahns have tried to understand why their medical bills continue to rise, the Deseret News has published several accounts in recent months that examine the state's growing health-care industry. Findings include:
- Hospital revenues: Despite rises in capital expenditures, many Utah hospitals' profits are staying well ahead of their costs. Intermountain Health Care Inc., a non-profit corporation that owns 18 of Utah's 48 acute-care hospitals, has earned more than $30 million a year in excess revenues since 1987. At the end of 1989, IHC had financial reserves - borrowed money and profits - of $207 million, which officials say is standard in the industry. Reserves total about 20 percent of assets. This percentage is less than the percentage that existed when The Church of Jesus Christ of Latter-day Saints divested its hospitals to the community in 1975 - and IHC was formed, IHC officials said.
Bottom line: Despite multimillion-dollar profits, Utah hospitals raise their patient rates each year.
- Hospital rates: Reports from several insurance companies suggest that costs at the new Primary Children's Medical Center are sharply higher than costs at surrounding hospitals for even the most simple treatments and procedures. FHP Health Care, Utah's largest health-maintenance organization, compared Primary's billings for patient care over the past two years with billings from the nearby University Hospital. FHP found that each day's stay at Primary cost 36 percent more than a day's stay at the state-owned hospital.
Primary said its costs are higher because it cares for more critically ill children, requiring its staff to be more highly trained. Primary Children's rates, officials said, are still lower than other pediatric hospitals in the country.
Since the U. department of pediatrics moved its neonatal medical residents and some of its pediatric medical residents over to Primary, FHP said more of its patients have been admitted to the more costly hospital.
Primary disputes that claim, saying 152 FHP patients were admitted to the old Primary Children's Hospital in the seven months prior to the opening of the new one. In the past six months, 144 FHP patients were admitted to Primary.
Bottom line: FHP attributes part of a July rate increase to higher rates at Primary.
- Construction of new hospital: FHP wanted to buy a local hospital to better serve its 124,000 Utah members. IHC would not sell Cottonwood Hospital Medical Center to FHP. Health Trust Inc. would not sell Pioneer Valley Hospital to FHP. Both hospitals have low occupancy rates. FHP would not abandon its plans to own its own hospital.
Bottom line: The construction of a $30 million hospital - while existing Salt Lake Valley hospitals are only half full - could cut other hospitals' revenues, ultimately driving patient rates up.
- Cost-shifting: For years, Utah's not-for-profit hospitals have been providing charity care to indigent patients. And for years, they've been shifting the cost of that care to paying patients. They have also shifted other expenses to paying patients, such as bad debt and unreimbursed care given to Medicare and Medicaid patients. Officials with Holy Cross Health Systems and IHC argue that all hospitals do it. If they didn't shift those costs, they would be out of business.
But cost-shifting accounts for 32 percent of rising health-care costs and premiums. The Cache Valley Mayors Association and Salt Lake County and Cache County attorneys offices sharply criticize the practice and want to know how non-profit hospitals can claim property-tax exemptions for charity care given when the cost of that care is shifted entirely onto the shoulders of paying patients.
Bottom line: The practice increases every Utahn's hospital bill by about $325 a day, according to the Utah Hospital Association.
- Integration of services: When two hospitals negotiate trades on services, patients sometimes pay more. For example, the demise of University Hospital's neonatal transport team at the same time Primary Children's created its own team resulted in higher air transport costs for the parents and insurance companies of sick babies flown to both Salt Lake hospitals.
Medical helicopters are now based at three hospitals located within a few miles of each other.
In a memo, U. officials originally blamed the U.'s transfer of newborn babies to Primary for a 5 percent increase in the U.'s hospital rates. Officials later backed away from that statement, blaming the increase on the federal government instead.
Bottom line: Utahns do not always save money when hospitals integrate services.
- Private physicians groups:
Federal investigators in several states are investigating physicians groups that may violate antitrust law by fixing prices. A group of about 85 pediatricians at University Hospital and Primary Children's have caught the state's attention for aggressively negotiating higher fees with local insurance companies.
Pediatric Faculty Physicians Inc. sent memos to several insurance companies announcing that the companies must negotiate with the doctors as a group and not individually. PFP also told the insurance companies that they provided the only pediatric critical care available in the region. PFP essentially told the companies it was the only game in town and the companies must pay the demanded fees.
PFP's memos to its own doctors showed that the rates PFP demanded were much higher than the rates the doctors had previously received or the rates paid to other specialists.
Bottom line: Several insurance companies - including Blue Cross Blue Shield - say they will have to raise insurance premiums in order to pay the rates PFP demanded.