Medical Spending Spiking In Once Thrifty Areas
Life + Money

Medical Spending Spiking In Once Thrifty Areas

Provo, Utah — If there is any place that should have medical spending under control, this is it.

Residents are among the healthiest in the country. Many are Mormons who don’t smoke or drink, and outdoorsy folks devoted to active lives. The biggest hospital is run by Intermountain Healthcare, a medical system lauded by President Barack Obama for providing high quality care while restraining costs. KAISER HEALTH NEWS

Until recently, Provo seemed to be a model for the nation. But spending on Medicare patients here has accelerated rapidly, as it has in many other areas of the country also known for cost-efficient care. The trend calls into question initiatives — including some in the new health care law — to encourage more profligate regions to learn from their frugal counterparts.

"It's very discouraging to see costs increasing rapidly in those low-cost areas we believe to have good care," says Paul Ginsburg, president of the Center for Studying Health System Change, a Washington-based research group. "They appear to be succumbing to the same forces that have led to high costs elsewhere."

Experts say Medicare spending trends often parallel those in the country's overall health system. In 2007, average Medicare spending per person in the greater Provo hospital market was $8,064. That was below the national average of $8,682, but far higher than it had been a few years before.

Between 2000 and 2007, Medicare spending in the Provo region rose on average 8.6 percent a year, nearly double the average national rate of 4.7 percent, according to data from the Dartmouth Atlas of Health Care, which analyzes geographic variations in health spending. Provo's growth occurred as Medicare beneficiaries underwent surgeries more frequently and spent more of their dying days in intensive care units.

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Spending Rises Elsewhere

Provo's spending increases aren't an aberration. Annual average spending grew at 7 percent or more in other traditionally low-cost areas, including Oxford, Miss.; Wausau, Wis., and Durham, N.C. Even in Rochester, Minn., home of the highly regarded Mayo Clinic, and Salt Lake City, where Intermountain is headquartered, Medicare costs grew faster than the national average, according to Dartmouth.

On their own, these areas aren't big enough to bankrupt Medicare. But the spending increases are particularly worrisome in places such as Provo where many providers have already made changes experts hope can hold down costs. These include adopting electronic medical records, focusing on prevention and increasing cooperation between doctors and hospitals.

Harvard professor Michael Chernew noted in a recent article that "even the most efficient delivery systems must wrestle with the adoption of expensive new technologies." Indeed, Provo's regional hospital market, which stretches south of Salt Lake City down the Wasatch mountain range and includes more than 26,000 Medicare beneficiaries, also has embraced some of the less admired traits of expensive health care markets.

Many doctors have set up their own large clinics where they share in the profits from diagnostic tests and other services. Physicians in the Provo region performed 17.3 percent more procedures on Medicare patients in 2008 than they did in 2000, outpacing the median national increase of 13.7 percent, according to a General Accountability Office study

"The first surgical center in Utah County was built by a physician from the hospital," says Rulon Barlow, a former county health board commissioner who runs the student health center at Brigham Young University in Provo. "So what did the hospital do? It built a surgery center. It wasn't too much longer that another outfit came in across the street."

Battling for patients and trying to accommodate a growing population, hospitals and clinics have gone on building sprees, installing new surgical and cancer treatment suites, diagnostic machines, heart surgery programs, outpatient clinics and sophisticated specialized services.

Fees Fuel Rise

This kind of rapid expansion is fueled by the Medicare's traditional fee-for-service payment system, which rewards doctors who offer more services, health care experts say. Patients, for their part, seem only too happy to get the latest that medical technology has to offer, as close to home as possible.

Dr. Wendell Gibby, a radiologist who owns his own imaging clinic, sees a dramatic change in the area. "The gastroenterologists owning their own CT scanners, the oncologists owning their own radiation machines . . . If you've got a million dollar scanner, you end up using it," he says.

Hospital executives and doctors insist they guard carefully against performing unneeded procedures. Dr. Scott Bingham, a cardiologist at the Central Utah Clinic, says area cardiologists have been performing fewer of the most expensive tests and surgeries in the last few years, which Dartmouth has not yet analyzed. "The only thing that I see increasing in Provo is the number of patients we see," he says.

And Mike Kennedy, a family doctor and the chief of staff at HCA's Timpanogos Regional Hospital in Orem, just north of Provo, speculates that the higher costs are due to better care. "You're probably seeing more aggressive treatment earlier on in disease stages," he says.

But some treatments were being performed more frequently in Provo while decreasing nationally, according to Dartmouth data covering 2000 through 2005. Those included operations to clear blocked leg arteries and replace heart valves. Repairs of aortic aneurisms and hospitalizations for hypertension and asthma also rose faster than the national average. While many procedures are still performed less frequently than elsewhere, a Dartmouth study released in April singled out Provo for having the highest shoulder replacement rate in the country.

Commercial insurers say prices in Provo and the rest of Utah still remain lower than the national average. But some experts say that could change, too.

"We take some comfort that we have less of problem in Utah than elsewhere," says Dr. Kim Bateman, vice president for medical affairs at HealthInsight, a Salt Lake City-based nonprofit that Medicare has authorized to find ways to improve the quality of care in Utah and Nevada. "But really I think we’re just behind them on the same curve — that we’re going to be subject to the same kinds of cost pressures as everyone else."