The rising cost of healthcare is everywhere. Even in small town communities, where spending tends to be small or limited, people can’t avoid the increase in healthcare costs. What’s driving the increase? It appears to be over utilization. Essentially, this means that the number of test and procedures is on the rise. This is due to the addition of new surgical and other specialty suites and increased technology at hospitals. These services are all paid for on a fee-for-service type arrangement – meaning the more test one does, the more the doctor or the facility performing the test or service will receive in payment.
By Jordan Rau
Kaiser Health News
PROVO, UTAH — If there is any place that should have medical spending under control, this is it. Residents of Provo, many of them Mormons who don’t smoke or drink, are among the healthiest in the country. The city’s biggest hospital is run by Intermountain Healthcare, which President Obama has lauded for providing high-quality care while restraining costs.
Until recently, Provo seemed to be a model for the nation. But spending on Medicare patients here has accelerated rapidly, as it has in many other areas of the country that are known for cost-efficient care.
The culprit: a swift increase in the number of procedures and tests being performed — a trend that has coincided with the additions of new surgical and cancer treatment suites and diagnostic machines at hospitals and clinics throughout the growing region.
“It’s very discouraging to see costs increasing rapidly in those low-cost areas we believe to have good care,” said Paul B. Ginsburg, president of the Center for Studying Health System Change, a Washington-based research group. “They appear to be succumbing to the same forces that have led to high costs elsewhere.”
This transformation calls into question initiatives — including some in the new health-care law — to encourage more profligate regions to learn from their frugal counterparts.
Medicare spending trends often parallel those in the country’s overall health system, experts say. In 2007, average Medicare spending per person in the greater Provo hospital market was $8,064. That was below the national average of $8,682, but far higher than it had been a few years earlier.
Between 2000 and 2007, Medicare spending in the Provo region rose on average 8.6 percent a year, nearly double the average national rate of 4.7 percent, according to the Dartmouth Atlas of Health Care, which analyzes geographic variations in medical spending. Provo’s growth occurred as Medicare beneficiaries underwent surgeries more frequently and spent more of their dying days in intensive care units.
Provo’s spending increases aren’t an aberration. Annual average spending grew 7 percent or more in other traditionally low-cost areas, including Oxford, Miss.; Wausau, Wis.; and Durham, N.C. Even in Rochester, Minn., home of the highly regarded Mayo Clinic, and Salt Lake City, where Intermountain is headquartered, Medicare costs grew faster than the national average, according to Dartmouth.
The increases are particularly worrisome in places where many providers have made changes to try to reduce costs. These include adopting electronic medical records, focusing on prevention and increasing cooperation between doctors and hospitals.
But Provo’s regional hospital market, which stretches south of Salt Lake City and includes nearly 27,000 Medicare beneficiaries in a population of more than half a million, also has embraced some of the less admired traits of expensive health-care markets.
Many doctors have set up their own large clinics where they share in the profits from diagnostic tests and other services. Physicians in the Provo region performed 17.3 percent more procedures on Medicare patients in 2008 than they did in 2000, outpacing the median national increase of 13.7 percent, according to a Government Accountability Office study.
“The first surgical center in Utah County was built by a physician from the hospital,” said Rulon Barlow, a former county health commissioner who runs the student health center at Brigham Young University in Provo. “So what did the hospital do? It built a surgery center. It wasn’t too much longer that another outfit came in across the street.”
Wendell Gibby, a radiologist who owns an imaging clinic, said he has seen a dramatic change in the area. “The gastroenterologists owning their own CT scanners, the oncologists owning their own radiation machines” are examples, he said. “If you’ve got a $1 million scanner, you end up using it.”
Hospital executives and doctors insist that they guard carefully against performing unneeded procedures. Scott E. Bingham, a cardiologist at the Central Utah Clinic, said: “The only thing that I see increasing in Provo is the number of patients we see.”
And Mike Kennedy, a family doctor and the chief of staff at the Hospital Corporation of America’s Timpanogos Regional Hospital in Orem, just north of Provo, speculates that the higher costs are the result of better care. “You’re probably seeing more aggressive treatment earlier on in disease stages,” he said.
But some treatments were being performed more frequently in Provo while decreasing nationally, according to Dartmouth data covering 2000 through 2005. They included operations to clear leg arteries and replace heart valves.
The number of aortic-aneurism repairs and hospitalizations for hypertension and asthma also rose faster than the national average. Though many procedures are still performed less frequently than elsewhere, a Dartmouth study released in April singled out Provo for having the highest rate of shoulder-replacement surgery in the country.
Commercial insurers say prices in Provo and the rest of Utah still remain lower than the national average. But experts say that could change, too.
“We take some comfort that we have less of a problem in Utah than elsewhere,” said Kim Bateman, vice president for medical affairs at HealthInsight, a Salt Lake City-based nonprofit organization that Medicare has authorized to find ways to improve the quality of care in Utah and Nevada. “But really I think we’re just behind them on the same curve — that we’re going to be subject to the same kinds of cost pressures as everyone else.”