"This number over here," says Rat-kiewicz, pointing to Patient B's total of $25,540.56, "for 90 percent of our patients, is a meaningless number. It doesn't mean anything."
Inlander disagrees. "Most hospitals create a charge as a way of negotiating the next round of payments," he says. Higher charges create a higher "base" for discounts to insurers, which eventually gets passed on to businesses and consumers in the form of higher premiums. And while it's true that uncompensated care is a major factor, the high salaries of hospital administrators and plant costs also contribute to the double-digit inflation in hospital charges nationwide.

"We aren't closing down hospitals or consolidating as we should," Inlander says. "We're still paying for these huge dinosaurs--all the new technology, the capital costs, the administrative costs."
Ironically, Presbyterian/St. Luke's is the biggest consolidator on the Denver scene. After a bumpy ride as a for-profit operation in the late 1980s, the complex was purchased by local investors in 1991 and returned to its historic not-for-profit status. Ratkiewicz claims the ongoing consolidation of the two hospitals "took $30 million in charges out of the system" last year by reducing the number of administrators and staff, upgrading the physical plant and eliminating duplication of services. The recent merger with Swedish Medical Center to create a "superprovider" known as HealthOne is expected to produce even more savings, despite $330 million in outstanding debt.

"Our charges this year are less than they were two years ago," Ratkiewicz insists. "Who else in Colorado has closed down a hospital to get these efficiencies?"
Still, a recent survey of area hospitals by the Denver Business Journal found Presbyterian/St. Luke's charged more than the state average for various common surgical procedures except one: knee operations. Ratkiewicz says the survey was based on 1992 figures, the hospital's "most inefficient year" because of the expense connected with moving patients from one hospital to the other.

The real path to reform, Ratkiewicz says, will involve not only overhauling the payment system but reducing the overall length of stay, expanding the already sizable role of outpatient care and making hospitals even more efficient.

"Under health-care reform, there isn't going to be anything left to shift around," he says. "Everybody will be covered, and we'll all be under a tighter system."
Tighter, at least, than now. To date Patient B's out-of-pocket expenses for her new knee have amounted to zero; Ratkiewicz says her account is closed. Yet she just received another bill from Presbyterian/St. Luke's for her nine-day stay last fall, seeking payment on an outstanding balance of $9,605.

Mom, I keep telling you: Those numbers don't mean anything.

Without knowing the brand names involved, it's impossible to determine whether Patient B's orthopedic implants (total price $6,975) amount to the Cadillac of artificial knees, as opposed to Patient A's economy model ($4,239.40). A more startling difference appears in the add-on charges involved in Patient B's visit to the operating room. Mayo charges a fee for the use of the room and $236.52 for "OR supplies," while Presbyterian/St. Luke's assesses a fee, then piles on more than a thousand dollars for sponges, cement, towels, the anesthesia mask--and, in a final bit of bloodletting, a $106 charge for the saw blade used in the surgery.

Part of the cost of the typical hospital room has to do with all the empty rooms elsewhere in the facility. Thanks in part to expanding outpatient care, occupancy rates nationwide have dropped significantly since the mid-1980s. "You're paying for 40 percent of the hospital beds in this country being empty," says Charles Inlander. Until recently, Denver was known as one of the most overbedded cities in the country. But Presbyterian/St. Luke's administrator Ratkiewicz says it's misleading to talk about "licensed" rather than "staffed" beds. Through consolidation, P/SL has reduced its licensed beds from 903 to 674, and staffs only 558 of them; occupancy of those beds has been running from 60 to 70 percent. Since P/SL has positioned itself as a "tertiary" hospital, specializing in expensive services such as organ transplants and cancer treatment, a certain number of beds must always be available for special clients--bone marrow or pediatric patients, for example--and can't simply be shifted to other uses.

Cost-shifting surfaces most vividly in the nickel-and-diming of patients for low-ticket, high-volume amenities such as ice packs, blankets, aspirin and basic in-room services, including checking a patient's pulse ($58 at Presbyterian/St. Luke's) or blood pressure ($68). Rochester Methodist may be one of the few hospitals left that still provides items such as "anti-embolism stockings" at no charge; Patient B was charged $56 for her fancy support hose, which retail at medical supply stores for around $35. Patient B also was billed $26 for a humidifier she never saw, $27 for mattress pads she didn't use, $84.55 for a "warming blanket" (a 4" x 6" strip of flannel) and $.75 each for four 7-Ups (she remembers getting one soda, which she didn't drink because there was no ice). P/SL administrator Ratkiewicz says the high price of blankets is just one way hospitals have attempted to pass along rising overall costs. "Over forty years [of price increases] you get these, I guess what seem to be absurd-type things," he says. "But if you lower the price of the blanket, you have to raise the price of the OR minute. It may be good public relations, but it's not going to make any difference in the long run."

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