Local hospital costs exceed state average
February 19, 2008
A recent study revealed that costs at Tahoe Forest Hospital are 70 percent higher than the state average, but local hospital officials say the costs are normal for the area.
“We come from the same market conditions as everyone else in the community,” said Bob Schapper, the hospital district’s chief executive officer. “Costs here are equivalent to our region and other mountain communities.”
But sponsors of the study, which include the California Public Employees’ Retirement System and the Pacific Business Group on Health, say lack of competition within a region appears to be a major factor in determining hospital service fees. They also said Tahoe Forest Hospital stood out in the study as a higher-cost facility compared to other hospitals in the state.
“Most of the hospitals that opt out at the high end are larger hospitals or teaching centers,” said David Hopkins, director of quality measurement for Pacific Business Group on Health. “Tahoe Forest shows up as having very high internal costs relative to other hospitals, and that’s hard to explain.”
Study sponsors also said their findings demonstrate how private payers, such as employers and their covered employees, are subsidizing the low payments made by government programs like Medicaid and Medicare.
On average statewide, private payers paid $18 billion for hospital services that cost $13 billion to provide, according to the study.
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“This report underscores what we have long suspected: That some hospitals are basing their prices to private insurers and patients on what they can get away with,” Peter V. Lee, chief executive officer of the Pacific Business Group on Health, said in a statement.
The study ” “Cost Efficiency at Hospital Facilities in California” ” was conducted by Seattle-based health care consultant Milliman Inc., and was based on data collected in 2005.
Schapper, meanwhile, said one of the reasons for high costs at Tahoe Forest Hospital is the publicly owned district offers a wide scope of services far greater than other rural hospitals, and these services need to be subsidized.
He said the hospital’s cancer center provides a service not seen in other rural communities like Truckee-Tahoe. Additionally, programs such as home health, hospice, community education and clinics for the uninsured contribute to higher costs.
“We offer a broader range of services to care for our community, but there are not as many people seeking those services as there would be in more populated areas,” Schapper said. “If we were a low-cost hospital, people would wonder how we did it.”
But Hopkins said that despite the variety of services offered, pricing is still relatively high.
“I don’t see the argument that Tahoe Forest gives as very compelling,” Hopkins said. “I would be surprised if what they are offering is different from what hospitals in other communities offer.”