(c) 2016 Jon L Gelman, All Rights Reserved.

Tuesday, July 8, 2014

Hospital Costs: Controlling The Uncontrollable

Hospital corridor, in gray
Hospital corridor, in gray (Photo credit: Julie70)
Medical costs are now the majority of workers' compensation payments and are now facing a new leveraging factor, hospital mergers. As hospital costs continue to soar, state workers' compensation systems are faced with the prospect of paying even more benefit dollars for medical costs.

The hospitals are not only merging to become more monopolistic. They are also acquiring medical practices at an increased rate. Coming under the umbrella of a medical institution, the physician-based hospital group practices maximize their ability to set prices as a large buying and selling group.

While consolidation is fashionably trending in many industries: airlines, petroleum and banking, the consequence has continued to be higher retail pricing. In an era of limited wages increases, a reduced need for skilled labor, the loss of Labor union's collective bargaining unit bases, and a limited base to draw workers' compensation premiums, hospital merges may become the next challenge.

Theoretically, only the best medical treatment results in the best medical outcomes. That puts injured workers back to work faster and results in lower disability payments. 
The NY Times editorial board suggests that the hospital merger issue should receive more attention:

"In retrospect, it looks as if Massachusetts made a serious mistake in 1994 when it let its two most prestigious (and costly) hospitals — Massachusetts General Hospital and Brigham and Women’s Hospital, both affiliated with Harvard — merge into a single system known as Partners HealthCare. Investigations by the state attorney general’s office have documented that the merger gave the hospitals enormous market leverage to drive up health care costs in the Boston area by demanding high reimbursements from insurers that were unrelated to the quality or complexity of care delivered."

Despite an attempt to control costs with fee schedules, workers' compensation programs maybe kidding themselves and ignoring the trees from the forest. Is the issue just too big for states and workers' compensation programs to handle? Are state programs significant enough to impact the hospital merger programs nationally as hospita extend beyond state lines or is this just another reason to take the next turn on the path to Federalization and allow a national system to control costs through a universal single-payer system.
Jon L. Gelman of Wayne NJ is the author of NJ Workers’ Compensation Law (West-Thompson-Reuters) and co-author of the national treatise, Modern Workers’ Compensation Law (West-Thompson-Reuters). For over 4 decades the Law Offices of Jon L Gelman  1.973.696.7900  have been representing injured workers and their families who have suffered occupational accidents and illnesses.