Health insurers pay about half as much for hospital care in Orange County than they do elsewhere in the nation, making it the lowest-cost market in the country, according to a federal study.
The study from the Government Accountability Office looked at 232 metropolitan areas across the U.S. and how much preferred-provider organizations paid for hospital care in 2001.
The PPOs studied are part of the Federal Employees Health Benefit Plan. They paid prices in OC that were 51% of the national average. The study provided percentages but not actual cost figures.
OC, as with other parts of Southern California, is relatively cheap for health insurers, thanks to the prevalence of health maintenance organizations here.
HMOs originated in the area and have been able to secure deeper discount pricing from hospitals and physicians.
Besides capping what they’ll pay for care, HMOs and PPOs have controlled costs in other ways, said Julie Puentes, a Garden Grove-based vice president of the Hospital Association of Southern California, a trade group based in Los Angeles.
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St. Joseph in Orange: adding four-story, 150-bed patient care building |
“There has been a significant effort to reduce usage by HMOs and PPOs as a way of controlling costs,” Puentes said. “If insurance companies lower costs, they stand to do better at the negotiating table.”
The federal study looked at PPOs rather than HMOs.
PPOs often attract members who are more likely to go to their doctors and have a higher rate of prescription drug usage, which generally leads to higher costs.
The agency said it commissioned the report because Congress is concerned about spending burdens facing the Federal Employees Health Benefits Program, one of the largest insurance programs in the country. It covered nearly 8 million people in 2004 and spent $21 billion.
The plan covers federal civilian workers, their families and retirees.
PacifiCare Health Systems Inc. of Cypress is one of 183 private health insurance providers nationwide that contract with the program, which includes both national PPOs and local HMOs.
“Healthcare spending per person varies geographically, and the underlying causes for the spending variation have not been fully explored,” the agency said in the report. “Understanding market forces and other factors that may influence healthcare spending may contribute to efforts to moderate healthcare spending.”
Researchers found that insurer-hospital pricing varied by 259% among the study areas. Competition, number of hospital beds and other market factors influenced cost.
OC is a competitive market,players include St. Joseph Health System of Orange, Long Beach-based Memorial Health Services, Dallas-based Tenet Healthcare Corp., which has five hospitals here, and Integrated Healthcare Holdings Inc., a Costa Mesa operator that bought four hospitals from Tenet last year.
In addition to the hospital chains, OC has strong independent hospitals,Hoag Memorial Hospital Presbyterian in Newport Beach, and UCI Medical Center in Orange, the county’s only teaching facility, as well as Kaiser Foundation Health Plan, the county’s largest HMO.
Even so, the county’s number of hospital beds has narrowed in recent years, according to Puentes.
“There used to be plenty of capacity here,” she said. “That’s no longer the case. Many hospitals are full or nearly full. Also, there are very few hospitals being constructed.”
Kaiser is building an Anaheim hospital to replace an aging facility in the city. And more space is on the way as hospitals expand.
Earlier this year, Hoag Memorial opened its $200 million Sue and Bill Gross Women’s Pavilion with more than 130 private rooms. UCI Medical Center is spending more than $365 million to build a new hospital facility on its campus. And St. Joseph Hospital in Orange is spending some $125 million on a four-story, 150-bed patient care building in order to both meet demand and the state’s earthquake safety law.
For insurers, though, that still means “there are only a certain number of hospitals you can contract with,” Puentes said.
The study looked at how much doctors are paid. It found doctors in OC were paid at about 87% of the national rate, similar to doctors in the Los Angeles-Long Beach area.
Bits and Pieces:
Cobalis Corp., Irvine, hired Thomas Stankovich as executive vice president and chief financial officer. Stankovich most recently served in the same position with MP Biomedicals LLC, Irvine, and is a veteran of Ribapharm Inc., now part of Valeant Pharmaceuticals International, Costa Mesa Beckman Coulter Inc., Fullerton, said that Robert Funari, chief executive of Crescent Healthcare Inc., Anaheim, is a new board member, replacing Ron Dollens, who retired earlier this year Edwards Lifesciences Corp., Irvine, said it awarded a total of $644,000 in grants from its newly established Edwards Lifesciences Fund. Organizations that received the grants included St. Joseph Hospital Foundation, Orange Chris Leo, a former aide to county Supervisor Lou Correa, now is regional director of advocacy for St. Joseph Health System Dr. Kenneth Kizer, chief executive of Medsphere Systems Corp., Aliso Viejo, was the subject of a profile by the Knight Ridder News Service that detailed his accomplishments and background, including his being orphaned at age 12, his odyssey in foster care and how that drove him And finally, since this is the last column for 2005, have a safe and happy holiday season. See you on Jan. 2.
