Monday, June 15, 2009

The "Why" of Hospital Costs, Present and Future

In a presentation delivered before the North Pacific Society of Internal Medicine in the fall of 1959, University of Oregon Medical School Dean Charles Holman, M.D., discussed in eerily modern terms some of the causes for the meteoric rise of health care costs in America and addressed the question of what could be done to control them. A typescript of "The 'Why' of Hospital Costs, Present and Future" in Holman's Biographical File preserves the text of his speech. It reads, in part:
Before going further I want to make the categorical statement that the upward spiral of hospital costs is going to continue throughout the immediately foreseeable future and cannot be stopped by any measure which any of us, operating in a free society, would wish to see adopted. [page 1; emphasis added]

Hospital personnel no longer accept the idea that because they are concerned with the care of the sick they should donate some of their services to the community by means of accepting lower pay scales. They now rightly feel and are demanding that they be paid the same rate as other workers.... Many hospitals practiced a considerable amount of paternalism in relation to their employees in that employees were required to accept meals and housing as part of their stipend. This was accomplished at considerably lower cost to the hospital than would have resulted from payment of a full salary for the work performed. [page 2; emphasis added]

The increase in national income has had an important effect. ... Rising standards of living are also reflected in increased demands for the niceties associated with hospitalization. These include such things as air conditioning, piped radio and television, drapes on the windows, phones at the bedside, a selective menu, all things not essential to the welfare of the patient, but all adding to the cost of hospitalization. [pp. 3-4; emphasis added]

[and yet]... the biggest single factor in the increase of hospital costs is the advance in medical science which has made better care available for our patients. [p. 7]

You may be interested to know our financial experience in performing open heart surgery. The cost per case, including diagnostic cardiac catheterization, an average of 21 days hospitalization, additional personnel beyond that needed for the usual extensive major surgical procedure, special laboratory work, special nurses, disposable supplies and of cleaning and retesting the pump oxygenator and other equipment between cases, averages approximately $1,800 per case. This does not include a penny for the services of any doctor involved. It does not include $18,000 worth of special equipment purchased for this procedure, nor does it include approximately $30,000 spent in salaries and supplies perfecting the technique and developing and training a team on over 100 dog procedures before the first patient was operated upon. This is an average cost of approximately $88.oo per day during a period when the average cost per patient per day in our hospital for all patients including open heart was about $31.00. [p. 8-9; emphasis added]

We now turn to the commonly heard question, "What are we going to do about the increased costs?" The answer is that we are going to do very little that will affect the upward spiral. [p. 9; emphasis added]

There is of course one way that hospital and medical bills can be held down. That is for an agency backed by or with governmental authority to impose by rules and regulations limits upon services which can be rendered to patients. This would hold hospital bills down, but it would also severely limit medical progress and its application to sick people. [p. 10; emphasis added]
Dean Holman sees what modern commentators are calling "rationing" as the only means of lowering healthcare costs, which is his "measure which any of us, operating in a free society, would [not] wish to see adopted." I guess we in the free society need to think about what we would wish to see adopted, should we be unwilling to part with drapes and television....

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