Technology Explosion, Hospital Consolidation Drive Healthcare Costs

PORTLAND, Ore. and CHICAGO -- The rapid proliferation of new medical technology and the rising trend of hospital consolidation -- two largely controllable factors -- are leading causes behind double-digit healthcare cost increases, according to new research released by the Blue Cross and Blue Shield Association (BCBSA). The research is the most comprehensive analysis to date of the leading drivers of rising healthcare costs.

Of all the key market forces driving healthcare costs, 79 percent are wrapped up in hospital and physician costs, with pharmaceuticals making up about 21 percent, according to a recent study. Inpatient hospital costs are outstripping pharmaceutical costs as a primary driver of healthcare inflation.

BCBSA's research shows:

-- 34 percent of the increase from 1998 through 2001 is due to inpatient

hospital costs

-- 19 percent of escalating inpatient hospital and outpatient costs are

directly related to the use and deployment of medical technology

In Oregon, Regence BlueCross BlueShield of Oregon president Mark Ganz pointed to the research results as further evidence that consumers need better information about costs to make value decisions about the health care they receive.

"It wasn't long ago that pharmaceutical costs were the leading driver of health-care costs," said Ganz. "The introduction of tiered benefits and formularies, however, made consumers more aware of the cost ramifications of their medication choices. As the research indicates, that has made a difference in pharmaceutical costs. Our challenge is to find further ways to design products to involve consumers more directly in their own health-care value choices. People can't make good decisions if they don't have information about the actual cost of the services they are receiving."

"In some cases, technology advances benefit patients by preventing the onset of disease, enabling earlier detection and saving lives," said BCBSA president and CEO Scott P. Serota. "All this advanced technology will mean little, however, if no one can afford it. All too often, investments in new technology are made with too little thoughtful planning based on sound medical evidence and a realistic assessment of community needs."

The technology explosion is occurring against a backdrop of rising provider consolidation, which the research shows is accounting for 18 percent of the recent rise in spending for inpatient hospital services. According to the research, every 1 percent increase in hospital market share due to consolidation leads to an approximate 2 percent increase in inpatient expenditures. Additionally, provider market structure accounts for 35 percent of the rise in outpatient expenditures between 1998 and 2000.

"Just as we recognize the often legitimate need for new technology, we recognize hospital consolidation can lead to improved efficiencies, lower expenses and better coordination of patient care," Serota said. "But, in practice, it often gives providers greater market clout to raise prices, which rarely translate into tangible benefits for patients, employers and society."

The research being released today is the most comprehensive analysis to date of the forces behind hospital and physician costs and offers the greatest opportunity for crafting meaningful ways to improve healthcare affordability and access to care. "It is a solid foundation for the Blue Cross and Blue Shield Association's multiyear initiative to find ways for keeping healthcare affordable and reducing the number of uninsured Americans," Serota said.

In addition to addressing technology and provider consolidation, the research also explores the impact of other factors such as healthcare quality, the growing nursing shortage and physician specialists' costs. Expert researchers from the University of Southern California, the Lewin Group and HealthShare Technology conducted the separate studies.

"The good news is the research points out that the leading causes of health-care cost increases are largely controllable. But, if left unchanged, these key drivers will further threaten access to affordable health care for millions and could add to the surging numbers of uninsured Americans," Serota said.

"BCBSA and the 42 independent Blue Cross and Blue Shield Plans have made keeping healthcare affordable and reducing the number of uninsured Americans our top priority," he noted. "But it will take all of us -- consumers, physicians, employers, hospitals, drug companies, lawmakers and insurers -- working together to make this happen."

Regence BlueCross BlueShield of Oregon is an independent licensee of the Blue Cross and Blue Shield Association. The company, which celebrated its 60th anniversary in 2001, provides medical, dental and related coverage for 1.1 million people in Oregon and Clark County, Washington. It is affiliated with The Regence Group, which also has Blue Cross and/or Blue Shield affiliates in Washington, Idaho, and Utah. Nationally, more than one in four Americans have Blue Cross Blue Shield coverage.

Source: PRNewswire

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