Soaring costs and souring relations plague health care's front lines

If you have a medical emergency, try to avoid Los Angeles County. Since the early 1990s, more than 70 emergency rooms have closed there, including six just in the past year. As a result, tens of thousands of people do not have quick access in the event of a medical crisis.

Something similar holds true in Anchorage, where a shortage of available beds, nurses and medical specialists means that many people who need to enter a hospital there have to shop around before they find one that can take them in for surgery.

Anchorage's problems are due in part to a hospital infrastructure that hasn't kept up with a growing population. California's emergency-room shutdowns, meanwhile, are blamed on a growing flood of uninsured patients and recent Los Angeles County rules that make it difficult for cash-strapped private hospitals to transfer emergency patients to county-run hospitals.

But the problems in these two states underscore a bigger issue: the strains felt by hospitals as they cope with soaring costs and soaring patient loads, a flood of complex new technology, and fractious relations with doctors and staff.

Here in Washington state, we've seen our own symptoms of the challenges faced by hospitals. This past summer, for instance, private-practice physicians with admitting privileges at 1,200-bed Swedish Medical Center all but went to war with hospital management over the hospital's efforts to hire doctors as employees, a move that would create in-house competition for the private-practice doctors also working there. That's part of a growing debate nationwide, as hospitals and doctors begin to see themselves as competitors for the nation's health-care dollars, not partners in sharing them.

Also, nurses at Group Health Cooperative — Seattle's largest health-maintenance organization — went on strike over their own rising medical costs. The mere fact of a strike should give everyone pause. Nurses are in short supply and, as a result, have genuine labor clout. An uprising by them spells trouble for the entire medical establishment.

Strains in America's 5,795 public and private hospitals will only get worse. For one thing, the California emergency-room shortage could become a model for the nation. This past August, the Census Bureau reported that 45 million Americans lack health insurance, a number that has leaped by 5 million in three years. Without health insurance, people inevitably await the direst medical problems, and then their only alternative is an emergency room. If hospitals lose too much money on emergency-room care, fiscal prudence demands the ERs be closed.

Moreover, California's angst comes as health officials in Washington, D.C., try to figure out how our medical system will cope with a flu pandemic that health experts see as a near-certainty in the coming years. The death toll in such a pandemic? Perhaps 250,000 Americans, very possibly more. The front line for this next pandemic? The hospital emergency room. Given the panic over the lack of flu shots, try to picture the scene at hospitals if sick people start arriving in droves.

But the big issues still are on the horizon. Foremost among them: the fact that America's 76 million baby boomers are hitting their peak hospital-use years. They will put unprecedented pressure on hospitals, demanding more and better care — all the while playing the role, as one hospital executive said to me, of "the pissiest old people the world has ever seen."

Already, studies indicate that even young boomers are using health-care services at a higher rate than their predecessors. That's due in part to the availability of relatively new procedures such as knee replacements and stomach-stapling surgery. But a refusal to age also is a factor. Boomers — and I'm one of them — want to feel at 60 like they felt at 30, and at 70 like they felt at 40.

I can't suggest that hospitals are going to collapse — they're the very definition of an institution that's too important to fail. But they're very nearly breaking, and while broken hospitals may run, they won't run well.

That has huge implications for the American health-care system. Hospitals are the workshops where doctors perfect their craft, employers for millions, and the places where people face the most traumatic junctures of their lives — birth, illness and death. They are also, as The Wall Street Journal recently put it, "the 500-pound gorilla of health-care costs." So any discussion about controlling those costs must begin with hospitals.

So how do we ensure that hospitals run well, not simply keep their doors open? There are no easy solutions, as all of them start with the word "money." But here are three starting points:

First, Americans with health insurance must forget their "I want my money's worth" mentality. In the hospital world, as in all health care, insurance has fostered a culture where patients never see the real bill, so they have no stake in ensuring that their medical care is efficient. That must change, perhaps through co-pays high enough to make price-consciousness worthwhile.

As for the uninsured, local and state governments must work with the federal government to find some way to insure the poor while easing hospitals' steep costs of caring for them.

After all, getting people in to see a doctor before their problems warrant the ER is far cheaper than the alternative. For one thing, emergency rooms are lousy at delivering efficient medical care — they need too much worst-case equipment and worst-case staffing. Moreover, the insured already help cover the uninsured in the form of high emergency-room bills, a portion of which goes to caring for the uninsured. Better to put a dollar figure on it, and make it part of the public discussion.

Secondly, hospitals must rethink their basic business model. In a way, hospitals resemble the airline industry — at least, the part of the airline industry that thrived before deregulation in 1978. Just as United Airlines and American Airlines knew they always could cover costs simply by charging more for tickets, hospitals (like their patients) became accustomed to a world in which insurance companies always paid up, not matter how costly a procedure. Now some insurers are balking, and Medicare continually cuts its payments for many procedures.

I'm not sure how one goes about devising a Southwest Airlines of hospitals, but something of that sort must happen. Hospitals must become more efficient, using technology to standardize care and streamline paperwork, while learning to cooperate — where feasible — with other hospitals to avoid costly service duplication. They simply must bring costs into line with what they can expect to generate in revenue.

Some are trying to do so. But in other cases, mindless competition greatly resembles what the airlines do in their fare wars. In western Pennsylvania, for instance, an expensive "hospital arms race" to attract lucrative magnetic resonance imaging (MRI) business has created a glut of the devices, with more MRI units in Pittsburgh — 160 — than exist in all of Canada.

Finally, hospitals must get a grip on the dirty secret of the medical establishment: Those medical screw-ups kill perhaps 100,000 people a year, making hospitals the sixth leading cause of death in the nation.

Some mistakes likely are inevitable — hospitals are human-centered systems, and humans make mistakes. But if hospitals can cut that accident rate in half through better training and more standards-based care — in which hospitals and doctors adopt "best practices" for many common procedures — malpractice claims will drop and doctors' and hospitals' insurance bills along with them. Such a move also is apt to reduce doctors' tendency to practice defensive medicine, ordering dozens of costly tests simply to ensure that no trial attorney can later paint them as tight-fisted or just plain lazy.

It must be said that hospitals' problems are hardly new. In 1751, Benjamin Franklin spearheaded the formation of Pennsylvania Hospital in Philadelphia, the nation's first. The board minutes from the hospital's early years — written in Franklin's precise hand — record constant fretting over patient fees (usually a few pennies a day), expenses (40 pounds — about $60 — a year to rent the hospital's first building) and employee costs (20 shillings a year, or about $2.40, for Elizabeth Garner, the hospital's first nurse).

Nonetheless, the hospital was broke almost from the start, within a year of its formation dipping into its capital fund to make ends meet. And this despite the fact its two doctors worked for free.

Pennsylvania Hospital did survive, and today is a 450-bed hospital with cutting-edge orthopedic, obstetrical and cardiac care, in the financial black if not exactly rolling in dough.

Possibly, one can take consolation in the fact it still is open despite its impecunious beginnings. But it's also worth noting that as recently as the mid-1990s, Pennsylvania Hospital was losing $32 million a year and was on the brink of shutting down. It survived only by an unpopular merger with a larger health-care network and embarking on a round of brutal cost-cutting. That was bitter medicine, but allowed Franklin's hospital to survive.

Nationwide, American hospitals — and those who need them — may face similarly difficult choices. And better to start making them now instead of waiting for what may be financial and medical chaos in a decade.

Douglas Gantenbein is the Seattle correspondent for The Economist. He is writing a book about hospitals.