Editorial

‘Health’ care cost increase rooted in expenditures for property instead of actual ‘care’

June 30, 2017
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Business Journal reporting on the high-volume increase of real estate transactions for “health care” is exactly another driver of the cost fracturing the fundamental practice of providing care at affordable prices. It is a driver of cost and comparatively has little to do with care. As such, pass-along costs continue to escalate and so, too, will the cost of health “care.”

It is notable the 2017 West Michigan Healthcare Economic Forecast showed outpatient care (in comparison to other regions) ranked the Grand Rapids area well above national levels and has doubled since 2003. It may not be a coincidence the number of outpatient clinics built by health systems, sometimes one across the street from another, comparatively has been prolific in the same time.

In the not-so-distant past, consumers blissfully were unaware of the continuing escalation of the price of health care, but the Grand Rapids business community was moved to action by more than a decade of escalating costs for insured employees. In Business Journal surveys, it remained the No. 1 issue among regional employers for 12 consecutive years, as costs continued to arch from 12 to 17 percent of the national GDP (current estimates show as much as a quarter of the entire GDP). That cost is less about “health” and much more about profit.

One of the central tools used by local business-leader-cost watchdogs measured statistical areas and gave oversight to overbuilding and over bedding an area. The more beds any one hospital needed to pay for could only be divided by the number of users; 100 users pay less than 10 users. It also posed fundamental questions in the technology buildup. In an oversimplified example, if PET scans are available in a facility every 10 blocks but used by just 10 people in total, costs skyrocket.

Partnerships among area health care providers saved significant amounts of money and were key to lower costs in the Grand Rapids region than any other place in Michigan (and most of the country). Now, competition instead of cooperation and partnerships is the norm.

National real estate company JLL Senior Vice President of Health Care Paul Heiserman told the Business Journal hospitals now are using analytics like national retailers, especially to select new sites, targeting more affluent communities (recently building out in Grand Haven and along East Beltline Avenue and East Paris Avenue). Heiserman noted need for efficiency is driven by the growing competitive nature of health care, and systems must be able to attract a set of patients more capable of paying.

“We’re in a largely competitive environment; most markets have quite a bit of competition and there’s an element of trying to protect, but also gain market share,” Heiserman said. “Particularly, market share that pays well, so the hospital can provide better service. Better services but not cheaper services, that’s driving up prices that are really unsustainable.”

Business owners (and patients) will continue to suffer the consequences.

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