Are hospitalization costs driving the cost of health care in Wisconsin?
A representative of the state’s hospital industry says they are not. But his statements are at loggerheads with the results of a recent study from the Center for Studying Health System Change (CSHSC) and with hospital rate-increase information and revenue statements filed with the State of Wisconsin’s Bureau of Health Information (BHI).
According to a recent article in the newsletter of the Wisconsin Health and Hospital Association written by Vice President of Finance George Quinn, hospital costs have increased at less than 5.5% per capita per year in Wisconsin since 1995. According to Quinn, that rate of increase reflects concurrent trends, including an aging population, a workforce shortage that is driving up wages, consumer demand for higher quality care, use of more advanced technology, and a movement to outpatient settings.
Quinn’s figures refer not to simple rate increases, but to the increase in hospital costs as a whole. The figure reflects increased utilization, cost shifting from government programs and other factors, according to Quinn.
But they do not jibe with information from the state Bureau of Health Information.
According to BHI data, which is sourced from fiscal information hospitals must share with the state each year, the total gross revenue at Wisconsin hospitals increased 60% between 1993 and 1999 – or 10% a year. Net patient revenue – or the amount of money left over after expenses – increased 43% over the same time period – 7.16% a year.
Quinn said that his data is sourced from BHI as well, but is processed by the American Hospital Association for use by its state chapters. The difference in figures, according to Quinn, lies partly in the specific hospitals that are included in the two sets of data. According to Quinn, only hospitals with critical-care units are included in the AHA figures and numbers are factored to reflect the slight change in state population. The population adjustment could be responsible for about half of a percentage point a year, he said.
Regardless of differences with BHI data, one reason that Quinn’s figures do not accurately reflect the pain felt by businesses paying premiums in the private insurance market is that his numbers include artificially depressed Medicare payments. Figures used by the CSHSC reflect hospital costs to private payers, and are used by the insurance industry to predict the cost of claims. However, BHI data includes all hospital charges, including Medicare and Medicaid, and still reflects a significantly steeper increase than Quinn’s data.
Eclipsing
national trend
The BHI rate increase data would support the idea that hospitalization is a major inflationary influence on health costs in southeastern Wisconsin. They do point to a more rapid increase in hospitalization costs in the region than elsewhere. Actual hospital rates in southeastern Wisconsin increased faster than overall spending nationwide last year.
According to the CSHSC study – which relies on hospital spending data from the Milliman USA Health Cost Index:
Rates increase
While overall spending on hospitalization is increasing – and increasing faster in southeastern Wisconsin than elsewhere – rate increases tracked by BHI show hospital rates in Wisconsin rising at more than 7% a year – with slower rate increases in southeastern Wisconsin with the exception of Milwaukee County.
Statewide, hospitals raised their rates by an average of 7.11% in 2000 and 7.14% in 1999.
While spending on hospitals in southeastern Wisconsin outstripped the rest of the state, rates increased more slowly here, pointing to increased utilization as the driving force. The only exception was a 7.29% average rate increase in Milwaukee County in 2000. In southeastern Wisconsin as a whole, average rate increases were 6.05% in 2000 and 6.51% in 1999.
"Overall cost is a function not just of rates but of use of services," Quinn said. "It reflects the number of people undergoing procedures and hospitalization – the number of admissions."
Rate increases do not necessarily translate directly into an increase in hospital revenue, according to Quinn.
"The rate increases that hospitals report to the BHI – that is what they actually charge payers," Quinn said. "They reflect increases for room rates, lab tests or for surgery. These are the figures they are putting into their annual budgets."
But the actual increase in revenue for a procedure or service is also driven by discounts negotiated by insurance carriers and other factors.
January 18, 2002 Small Business Times, Milwaukee
