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Page 5 - PLAIN DEALER-HERALD. WEDNESDAY. JANUARY 23.19851 --- i i i n i i i . i i National pricing system helps curb rise in health care costs Four area hospital* showed r- V Editor's Note: The McHsnry Plaindesltr Hortld's four-part series on the costs of health care continues with this third Installment, in this column news service writer Alex Rodrlqusz examines DRG fees, a new national pricing system for hospital treatment costs. 9y Alex Rodriguez Federal and state legislators have tightened their grip on rising health care costs, and according to health care officials, hospitals will face even more stringent cost- cutting measures within the next few years. The Prospective Pricing System, a nationwide reim­ bursement system aimed at resc ̂ ailing Medicare program, now is phased into all hospitals and has made a significant dent in curbing the rise of health care costs. Under the system, which was introduced in October 1983, the government win pay hospitals pre-determined flat fees for services for Medicare patients. Almost every hospital falls into one of 468 fixed-fee slots Called Related Groups (DRGs). a Hospital's cost to treat a patient is less than the DRG fee, the hospital can keep the difference. If the costs exceed the fee, the hospital must absorb the loss. In Illinois, the statewide average for length of stay dropped 4 percent from last year, mostly because of PPS. Moreover, PPS has induced hospital administrators to implement cost-saving outpatient programs, and doctors now are beginning to use only those procedures aqd tests they consider absolutely necessary. But, according to Tony Sullivan, public relations director for the Illinois Hospital Association, federal and state lawmakers are not finished yet: -Ibe Health Care Finance Administration (HCFA), PPS's administrative arm, is looking at including capital improvement funding into PPS. Just how they plan to do that has not been determined, but hospitals are keeping a watchful eye. . -̂Doctors' fees for inpatient services also may be in­ troduced into PPS. Although physicians' groups like the American Medical Association are expected to lobby against such a measure, the federal government lis considering it, and insurance groups and the Association of Retired Persons are pushing for the measure. , -HCFA wants the current DRG rates frozen, which would mean the rates could not be increased to keep pace with mi length of stay for all Medicare. Sherman In the average g those under St. Joecpfi hospitals in decreases of two days and one day respectively in i length-of-stay (LOS), according to hospital Average lengths of stay also dropped at Memorial for McHenry County in Woodstock and, at the Illinois Medical Center in McHenry, from 6.9 to 6.2 'Without PPS, we couldn't havte been that aggressive with our staff and , with the patiepts," said Marlene Hayma, St. Joseph community relations director. However, load hospital administrators have their share of complaints about the system. While they say that noble, they also fed that sometimes is" ivernment has imposed a system and constrictive. the idea of providing an Incentive for containing costs is also fed the govern Imes is inequitable "When you take all illnesses known to mankind and throw them into one system, there are going to/be some problems, and there are going to be some inequities," said Mike O'Connor, fiscal services director for Northern Illinois Medical Center. / • O'Connor said that inequities show up in the actual fixed rates assigned to each ORG. For example, the rate for DUG 039 - lens procedures -was set in October 1983. But that rates does not take into account that lens.implants now are used in almost every DRG 039 case. Lens implants generally cost $400 to |60Q. So, each time a hospital has a ORG case, it loees $400 to $500. "That's going to happen with other DRGs in the future," said Carolyn Brown, DRG coordinator for Memorial Hospital, Woodstock. "I'm suspect on how they came up with those prices," said Gil Pluth, finance director at St. Joseph. "They've taken a lot of averages and thrown them together." HCFA officials, meanwhile, maintain that the rates balance out In the sense that hospitals will save money on some DRGs and lose on others. * " "We didn't pull these figures out of a hat," said Marty Stanton, deputy coordinator for HCFA's office in Chicago. "If some hospitals are losing money on PPS, then some are very well because the government hasn't saved on the system ̂ which a Detroit, Mich., man suffered a heart attack and died two days after being ~ gthof unng on uie sysiem. cites an example in i suffered a heart attack and • admitted. Because he stayed unde stay for the heart failure DRG, the hospital received $12,000 as reimbursement for that DRG. "Hie rates balance out," Stanton said. v , / If hospitals are concerned about the inequity in rates, they are even more worried about the gradual shift to a national rate that has been built into the system. At present, the DRG system is based on a blend of each individual ' hospital's average cost with a regional average cost. In the first year of PPS, that ratio was 7S percent of the hospital's cost to 25 percent of the regional average. This year, the hospital's share dropped to 50 percent, and the rest is split between a regional average and a national average. Beginning in October, the hospital's '4 average will decrease further to 25 percent, and eventually,1 " in 1986, the hospital's average will be phased out, and the system will be totally based on a national average. The three-year phasing-in period was Used to ease the transition to a national average rate. But for hospitals, the national average rate could result in major losses in revenue and possibly could force some closings, according to hospital < administrators. "It's good if you're in an area where hospital costs are low, like the South," O'Connor said. "But in the North ̂ Central region, hospitals are going to be hurt by the phasing in because costs are generally higher in our area." John Graham, president of Sherman Hospital, said that his hospital is better off now because of PPS, but, when the national rate is phased in, Sherman will feel the crunch. "The national rate concerns us. We may have to get into ** other businesses not related to hospitals or go to philan- - thropy to make up for the loss," Graham said. Indeed, many hospitals' reimbursements will be less under the national rate. For instance, at Sherman, the DRG rate for heart failure is $3,443. But when the national rate is phased in, that rate wfll be $3,197 - almost $250 less than the current rate. Even with its problems, hospital administrators said '«•* PPS hfes helped and will continue to do so. They also said • ̂ that SB 495 helps because it encourages competition. But - they still maintain they will fight against further regulation, like caps on revenue. Said Sullivan, "There are two ways to control health care costs • - through regulation and through competition. We are doing a good job using competition, and we donfc ,< think regulation is the answer." PA also wants to eliminate 52,000 unnecessary ad­ missions statewide over the next two years. Hospital ad­ ministrators consider that an unreasonable goal. At the state level, when lawmakers passed the Ulinnis Hospital Finance Reform Act (Senate Bill 495) in August 1984, they created an 11-member panel to monitor state hospitals' performance on cost containment. If the panel, called the Health Care Cost Containment Council,' finds within the next two yeaflr&LiyiMpitals are adequate job of contaiJ^C0st*, it passage of regulatory legpslaition such as caps on revenues and reimbursements for capital caps Sullivan said that revenue and capital improvement s were in the original language of SB 495, but the IHA successfully lobbied against the caps, i) would resi" "(The caps) would result in a $200 million loss to hospitals in the state," Sullivan said. Still, the caps may reappear in 1986 if state legislators believe hospitals are not containing costs, Sullivan ex­ plained. If hospital costs in Illinois increase at a faster rate than the general economy, the caps might be enacted. . "It puts us in a tough situation. If hospital costs don't stay with the general economy, they'll try to cap at least the revenues again in 1986," Sullivan said. However, Sullivan says Illinois hospitals indeed have held cost increases below the increases in the general economy. While health care costs increased 2.6 percent from August 1983 to August 1984, the consumer price index rose 4.5 percent over that same period. SB 495 also mandates the publishing of health care rates for common procedures. Sullivan says hospitals generally will have no problems with that provision. Locally, hospitals are coming to grips with PPS, even though they admit the system has its bugs. Carolyn Brown, DRG coordinator for Memorial Hospital for McHenry bounty in Woodstock, reviews a list of diagnostically related groups (DRGs) that have been established under Medicare's one-year-old pricing system. ' - . 'r>< ' Under the system, the U.8. government pays hospitals predetermined flat fees for service to Medicare patients. Brown says some of the rates are unreasoaaMe. DO YOU LIKE HIDDEN TREASURE? ARE YOU GREAT AT SOLVING MYSTERIES? Then Cone Join the 111 2nd Annual McDonald's® McHENRY COUNTY TREASURE HUNT beginning Jan. 21 at the following locations only: 130 SO. VIRGINIA, CRYSTAL LAKE 551 CRYSTAL POINT OR., CRYSTAL LAKE 40 SO. ROUTE 12, POX LAKE 352 SO. DIVISION, HARVARD 4411W. ELM ST., McHENRY 250 SO. EASTWOOD, WOODSTOCK THE MeHE$RY HIGH SCHOOL 'S NEGOTIATIONS POSITION 1. The Board is Offering teachers a 4.2% raise. We are asking for 6.75%. Our "bottom line" represents a $60,000, $600 per teacher, increase to the Board's 4.2% offer. This $60,000 is, the approximate contribution the teachers have paid for insurance the past three years. 2. The $60,000 cost to the Board is approximately 4% of the Boards ac­ cumulated financial surplus as stated in its annual report to the State of Illinois in June, 1984.: ~ 3.Teachers have paid one-half of their insurance costs for the past three years; Teachers have agreed to do this in order to help the Board during "hard times." Now that the Board is experiencing good times, we are asking for them to reinstate that health insurance benefit. < , . *. - f- 4. Insurance rates have increased by 1.5%. The Board wants to include - that (benefit) cost as part of our (salary) raise. We see it as a benefit which is already ours. ^ 5. We feel that the Board has not been consistent when reporting other raises. Reported raises for administration did not include the 1.5% in­ surance increase. 6. We have not ruled out a multi-year contract. However, the Board will only offer us a 4% raise for the second year. We do not wish to be locked into such a small percentage increase. 7. We have negotiated for ten months. Neither side is able to reach agreement. The teachers are willing to have an objective third party arbitrate the difference. The Board will not agree to this request lor binding arbitration. Ahy agreement to accept binding arbitration would immediately end the,strike. 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