HOSPITAL COSTS: Remain Flat For Third Year In A Row

      The American Hospital Association reported yesterday that although hospital costs have remained nearly flat for three years in a row, it is "unclear how long this trend can continue." The report, Hospital Statistics, surveyed more than 5,000 hospitals and health systems and found that hospital costs grew only 0.6% in 1997. Average hospital stays dropped to 6.1 million days while outpatient visits rose 2.3% at community hospitals in 1997. Over the past five years, inpatient days have dropped nearly 13% and outpatient visits have increased 29%. In addition, the report found that 23% of hospitals developed HMO insurance products, up from 19% in 1994. AHA President Dick Davidson said, "With the resources needed to meet the Year 2000 technology challenges and skyrocketing drug prices, keeping costs low will become more difficult for hospitals and health systems across America." The report notes that hospitals "also face pressure from competition, managed care and government price controls" (AHA release).

State Watch

• Maryland: In an op-ed piece in the Baltimore Sun, Maryland Hospital Association President Calvin Pierson blasts a proposal from the state's hospital rate setting commission that would push Maryland's rates to 3% below the national average. Pierson asks, "[I]s it reasonable to expect that hospitals can deliver superior care at costs that are below the national average?" He notes that the number of hospitals in the red jumped to 17 in 1998, up from 10 the year before, and warns that this "alarming trend ... threatens to undermine" the state's health care system. Instead, he calls on the commission to use more "realistic benchmarks" and compare Maryland's hospital costs to states with similar demographic compositions, such as Massachusetts, New York and Connecticut (1/11).
• New York: The United Hospital Fund released its quarterly Hospital Watch, which found that lower costs and higher revenue boosted hospitals' margins to 1.2% in 1997, up from 0.9% the year before. Inpatient visits fell 2%, though they still accounted for three-quarters of patient revenue. Outpatient visits jumped 17% to 10.8 million (Dec. issue). Sharon Salit, senior health policy analyst for the UHF, said, "Inpatient revenue gains varied significantly by hospital. Academic medical centers had the largest increase in average inpatient revenue per discharge at 7.9% while small hospitals averaged a loss of 1.6%." Hospital Watch reports that overall costs fell 2.5%. In addition, the proportion of managed care patients rose from 29% in 1995 to 47% in 1997 (UHF release, 1/8).
• Pennsylvania: Western Pennsylvania's hospitals "reported their lowest first quarter profit margins in 15 years," the Pittsburgh Post-Gazette reports (Gaynor, 1/9). Ian Rawson, president of the Hospital Council of Western Pennsylvania, said, "More than half of the region's hospitals, approximately 55%, are showing a net operating margin loss." Hospital operating margins are down 1.51% from last year to just 0.6%. Rural hospitals have been hardest hit, reporting an average operating margin loss of 0.66%, compared to a 0.17% gain for urban hospitals. Patient days are down 4.1%, falling for the ninth consecutive year, admissions dropped 1.5% and the average length of stay fell 2.7% to 4.7 days. Outpatient visits and outpatient surgery rose about four and a half percent each, while inpatient surgery fell 0.4% (HCWP release, 1/8).

Beyond The Pie Charts
      Hospitals and medical device manufacturers are quietly battling over a practice that cuts costs but increases the risk of infection: the sterilization and reuse of complicated and expensive medical devices that were designed to be used only once and thrown away. A report from the Ohio Hospital Association charges that device manufacturers have "much to gain and little to lose" from labeling devices for "single use," since it "limits liability and increases sales." But the Health Industry Manufacturers Association is lobbying the FDA to crack down on companies that resterilize supplies such as cardiac catheters and abdominal surgical staplers. To shed some light on the issue, the Cleveland Clinic has spent four years studying the feasibility of reusing cardiac catheterization supplies, and initially found that many could be safely reused. But an as-yet unpublished study found that the legal, political and regulatory hassles make the process not worth the effort (Drown, Akron Beacon Journal, 1/10).