Memorial Health Service’s occupational health program is raising fees by 6 percent.
The price increase applies only to contractor employers and does not affect regular patients, said Chris Valentine, spokesman for the hospital system.
“Simply, the cost of providing the service has increased,” he said. “Supply cost, laboratory expenses have all gone up so we needed to increase our rates to offset the expenses. It’s been five years, so they just had to make the change to keep up with costs.”
Even though the country is in a recession, medical care is still subject to inflation, said Steve Berkshire, health care administration professor at Central Michigan University.
“The reason they raised occupational health rates has to do with increased expenses relating to people with workplace injuries,” he said. “Medical inflation is a very real problem for hospitals.”
While this is the first time in five years that Memorial has increased rates for occupational health services, both local hospitals adjust their rates at the beginning of their fiscal years: January for Memorial; July for Penrose-St. Francis Health System.
And both say rate increases are a normal part of doing business.
“We usually do an across the board rate increase,” said Mike Scialdone, chief financial officer at Memorial. “It’s usually between 5 and 7 percent, which is what hospitals try to stay with. But we have an increase – every year. It’s just part of health care right now.”
As they determine budgets, hospitals compare prices by using information from the Colorado Hospital Association, which provides a detailed list of hospital charges throughout the state.
“We use that information widely when we’re considering price increases,” said Danny Reeves, interim chief financial officer at Penrose-St. Francis. “Some of our price increases are dictated to us because we are part of the Centura system, but they always take our input.”
Both hospitals also keep an eye on the competition’s prices – and both try to keep prices within 90 percent of the average price in Colorado.
“Our yearly increases are never across the board,” Reeves said. “We use a third party to coordinate the prices, and make sure they’re in line with our competitors.”
Centura looks at overall patient demand in each area before making the decision to raise prices – and those increases can come at any time.
And other hospitals apparently follow that same procedure. Prices for hospital services rose 1 percent during April, the largest one-month increase since October 2007, according to figures from the Bureau of Labor Statistics Consumer Price Survey.
During March, hospital prices increased 0.6 percent. For the 12 months that ended during April, the hospital price index increased 7 percent, compared with 8.1 percent a year ago.
Hospitals continue to raise prices to meet the technological needs of providing services, according to research from the Robert Wood Johnson Foundation.
“Technology – not demographics or medical malpractice – is the key driver of health spending, accounting for an estimated half to two-thirds of spending growth,” the report said. “Other important drivers of health care spending include health status (particularly obesity) and low productivity gains in the health care sector.”
Estimates of the contribution to health care spending range from 38 percent to more than 65 percent.
“Technology drives spending both through the substitution of higher cost services for lower cost services, and the expansion of available treatments,” the report said. “Obesity is a significant factor driving health spending, accounting for an estimated 12 percent of the growth in recent years.”
Runaway health care spending means that the United States spends more than $7,000 per person each year on health care. Despite that amount of spending, 16 percent of Americans are uninsured – unlike in other countries that spend less and provide universal coverage.
“Between 1985 and 2006, health care spending increased by an average of 7.7 percent, while gross domestic product increased 5.6 percent per year,” the policy report said. “Hospital care accounted for 31 percent … of overall health care spending.”
But the health care system as a whole might be coming to a point where it can no longer support annual price increases, Berkshire said.
“I’m wondering if we’re already at that point,” he said. “If we aren’t, then we’re going to be there in the next three to four years. Prices go up because the amount Medicare and Medicaid pays keeps going down, managed care negotiates discounts – so hospitals have to make up that money somewhere. They raise rates to cover the deficit.”
Health care discussions in Congress show that major players – the American Medical Association and the American Hospital Association – realize that the system has to stop increasing rates at some point.
“They’ve agreed to cut $2 trillion out of their costs in the next three to four years,” Berkshire said. “That’s pretty good evidence that the rate hikes are untenable.”