New Memorial lease could drive up health care costs

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Hospital systems  vying to lease Memorial could end up passing millions of dollars in lease costs on to customers through higher costs for care, unless price controls are built into a new lease.

It’s happened before and could happen here, said Dr. Steve Berkshire, a professor and director of health administration for Central Michigan University.

“When Humana took over the county-owned hospital from the University of Louisville in Kentucky, that was spelled out in the agreement – costs would not rise as a result,” Berkshire said. “But that’s the exception – it has to be spelled out.”

That’s because hospitals that are spending millions up front might have to borrow the money, then recoup the expense of the lease through higher health care prices. Even in the case of a system with very deep pockets, like HealthOne/HCA, there has to be a return on the investment.

And, Berkshire said, Centura Health’s fears of a “medical arms race,” are accurate. Centura said prices would rise at both hospitals if an outside entity was brought in – in order to compete. The owner of Penrose-St. Francis Health System said that private insurers would bear the brunt of those higher charges.

Although some of the businessmen on the task force said they were “baffled” at the concept that competition could actually increase prices, Berkshire said that the health care industry doesn’t operate the way other companies do.

“Typically, hospitals compete by getting the latest technology, by building new wings, new hospitals,” he said. “They’ll duplicate services, just to hold on to their patient base. And that will drive up prices. It won’t drive up prices for people on Medicare or Medicaid.”

Hospitals in very competitive markets have to negotiate higher rates with private payers, because the federal government sets the prices for Medicare, Berkshire said.

“It can get expensive,”he said.

To see the responses from the bidders about higher charges and competition, see Friday’s coverage.

The city council led task force is meeting this afternoon for a public hearing to get input about the bids. The meeting starts at 1 p.m. and is in city council chambers.