State hospital spending far exceeds national average
Hospital costs in Massachusetts, fueled by 14 years of increases, stand more than 55 percent above the U.S. average, according to a report released Tuesday morning.
After falling for nearly 20 years as a percent of the national average, costs started climbing in 1996. The per-person hospital cost in Massachusetts in 2007 was $3,015 compared to the U.S. average of $1,941, according to the report by two Boston University professors.
Alan Sager and Deborah Socolar of the B.U. School of Public Health concluded that $7 billion would have been saved in Massachusetts in 2007 if the hospital cost per person here had equaled the national average.
The professors said hospital costs in Massachusetts were 52 percent above the U.S. average in the mid-1970s. "Powerful economic and political forces" drove costs here down to 30 percent above the average in 1996 before costs began climbing again, reaching an excess of $1,074 per person in 2007.
The professors cautioned that that pre-1996 cost containment coincided with cost reduction methods that "appear to have been dangerous to some patients" and were "more than offset" by rising costs of non-hospital care.
Sager and Socolar said the state's 2006 health care reform law "is simply not responsible for the recent rise in the Massachusetts hospital cost excess." They said the excess also cannot be explained by excess beds in hospitals here, long stays, or low occupancy. "No single smoking gun explains the durable excess or the rebound. Many hospital, physician, payment, political, and other forces are at work," according to the report.
According to the report, the forces include:
High teaching hospital share of patients, MD supply, surgery rates, and non-ER outpatient visits;
New or recently reinvigorated factors: admissions, ER visits, staffing levels (not average compensation, wages or benefits), non-labor costs;
Substantial growth in revenue helped to make higher spending possible;
Very heavy and rising reliance on costly teaching hospitals;
The nation's highest physician-to-population ratio and past private insurance regulations limiting fees spurred development of an elaborate and expensive pattern of physician and hospital care;
Hospitals in Massachusetts are unusually influential politically - they argue that they are vital to the state's economy; they have become central members of business groups that once fought to restrain hospital costs; and some won vast financial leverage and power to obtain higher prices.
Sager and Socolar concluded: "We have long urged that more money to finance business as usual in health care is both unaffordable and unnecessary. Both free markets and regulations have failed, resulting in financial anarchy and higher health costs. Most past efforts to contain hospital costs have failed about as badly here as nationally. But there have been some successes. It will be helpful to recall the forces that squeezed the state's hospital excess to 30 percent in 1996."
Reporting by the State House News Service.