The cost of health insurance will double in the next five

years, experts predict, if health-care costs keep rising as they have been. By

2008, a family policy in West Virginia could cost $18,000, and one in three

could be uninsured.

Why is this happening?

As part of our ongoing examination of the cost of health

insurance, this installment in the Everybody at Risk series focuses on one of

the drivers of health-care costs: the state's skyrocketing hospital spending

and the agency that was created to control it.

A state agency charged with keeping medical costs under control

has given hospitals virtually every construction dollar they've asked for in

the past decade, according to a Sunday Gazette-Mail analysis.

The state Health Care Authority is supposed to determine if

proposed new construction or renovations are necessary, in order to prevent

expensive duplication of services. But since 1990, the authority rejected less

than 4 percent of the money requested by hospitals for construction and

equipment. It approved more than $1 billion in spending.

Meanwhile, the authority has experienced a surge in new

requests for hospital construction — almost $700 million this year, up from

$186 million only four years ago.

Hospital officials say they have to spend the additional money

to keep up with the latest technology and replace aging buildings. But some

question whether all this spending is leading to higher medical bills, which

make health insurance more expensive for everyone.

"When you spend $50 [million] or $60 million in a community to

expand services, the community has to pay for it," said Greg Smith, chief

executive of Mountain State Blue Cross Blue Shield, the state's largest health

insurer. "We've got to find some way to get control of capital expenditures in

this state."

'It's hard for the ordinary consumer'

Capital projects are only one part of a hospital's expenses,

but they make up a part that state regulators could control. Salaries for

hospital staff might eat up more of a hospital's budget, but with a shortage of

The Legislature created the Health Care Authority in 1983 to

control health care costs, mainly by preventing duplication of services between

hospitals in the same area.

Competition might drive down the cost of clothing or food, but

competition in health care actually can increase costs, Smith

For

example — two neighboring hospitals buy the same piece of expensive equipment,

but there are only enough patients to justify one. The patients in that

community now have to pay for two pieces of equipment.

So the Legislature created a Certificate of Need (CON) process,

where hospitals have to prove that their proposed new spending is necessary and

does not duplicate other services. Hospital officials must file a CON request

and prove their case to the Health Care Authority.

The process itself is expensive and difficult, and might deter

hospitals and others from attempting unnecessary projects in the first place,

"They generally will not go through the time and expense it

takes to apply until they determine they fulfill the standards," she

Once an application is made, the authority almost never rejects

it.

"If a hospital can prove that it can be paid for, that's really

the major standard for approval," Smith

just pass it on to the private sector, and have them pay for it."

Hospitals often hire experts and lawyers to justify the need

for a project. Most of the time, no one from the community attends to represent

patients when hearings are held.

One exception is physician-turned-lawyer Richard Lindsay, who

is fighting a request by Charleston Area Medical Center for a $30 million

computer system. Lindsay said that, even with his experience as a malpractice

lawyer, he has trouble fighting a CON request.

"It's hard for the ordinary consumer, or for me, frankly, to

know what to do," Lindsay

which have done this work for 20 years."

Older equipment, facilities

At one point this year, four hospitals within 50 miles of one

another asked the Health Care Authority for permission to build new buildings

worth $400 million.

Stonewall Jackson Memorial in Weston dropped its proposal for a

Morgantown received permission to build a $75 million addition.

And the major hospitals in Clarksburg and Fairmont want brand-

ambulance drive of one another, and cost more than $300 million.

The HCA tried to convince those two hospitals to merge, but

The cost of health insurance will double in the next five

years, experts predict, if health-care costs keep rising as they have been. By

2008, a family policy in West Virginia could cost $18,000, and one in three

could be uninsured.

Why is this happening?

As part of our ongoing examination of the cost of health

insurance, this installment in the Everybody at Risk series focuses on one of

the drivers of health-care costs: the state's skyrocketing hospital spending

and the agency that was created to control it.

A state agency charged with keeping medical costs under control

has given hospitals virtually every construction dollar they've asked for in

the past decade, according to a Sunday Gazette-Mail analysis.

The state Health Care Authority is supposed to determine if

proposed new construction or renovations are necessary, in order to prevent

expensive duplication of services. But since 1990, the authority rejected less

than 4 percent of the money requested by hospitals for construction and

equipment. It approved more than $1 billion in spending.

Meanwhile, the authority has experienced a surge in new

requests for hospital construction — almost $700 million this year, up from

$186 million only four years ago.

Hospital officials say they have to spend the additional money

to keep up with the latest technology and replace aging buildings. But some

question whether all this spending is leading to higher medical bills, which

make health insurance more expensive for everyone.

"When you spend $50 [million] or $60 million in a community to

expand services, the community has to pay for it," said Greg Smith, chief

executive of Mountain State Blue Cross Blue Shield, the state's largest health

insurer. "We've got to find some way to get control of capital expenditures in

this state."

'It's hard for the ordinary consumer'

Capital projects are only one part of a hospital's expenses,

but they make up a part that state regulators could control. Salaries for

hospital staff might eat up more of a hospital's budget, but with a shortage of

The Legislature created the Health Care Authority in 1983 to

control health care costs, mainly by preventing duplication of services between

hospitals in the same area.

Competition might drive down the cost of clothing or food, but

competition in health care actually can increase costs, Smith

example — two neighboring hospitals buy the same piece of expensive equipment,

but there are only enough patients to justify one. The patients in that

community now have to pay for two pieces of equipment.

So the Legislature created a Certificate of Need (CON) process,

where hospitals have to prove that their proposed new spending is necessary and

does not duplicate other services. Hospital officials must file a CON request

and prove their case to the Health Care Authority.

The process itself is expensive and difficult, and might deter

hospitals and others from attempting unnecessary projects in the first place,

"They generally will not go through the time and expense it

takes to apply until they determine they fulfill the standards," she

Once an application is made, the authority almost never rejects

it.

"If a hospital can prove that it can be paid for, that's really

the major standard for approval," Smith

just pass it on to the private sector, and have them pay for it."

Hospitals often hire experts and lawyers to justify the need

for a project. Most of the time, no one from the community attends to represent

patients when hearings are held.

One exception is physician-turned-lawyer Richard Lindsay, who

is fighting a request by Charleston Area Medical Center for a $30 million

computer system. Lindsay said that, even with his experience as a malpractice

lawyer, he has trouble fighting a CON request.

"It's hard for the ordinary consumer, or for me, frankly, to

know what to do," Lindsay

which have done this work for 20 years."

Older equipment, facilities

At one point this year, four hospitals within 50 miles of one

another asked the Health Care Authority for permission to build new buildings

worth $400 million.

Stonewall Jackson Memorial in Weston dropped its proposal for a

Morgantown received permission to build a $75 million addition.

And the major hospitals in Clarksburg and Fairmont want brand-

ambulance drive of one another, and cost more than $300 million.

The HCA tried to convince those two hospitals to merge, but

they couldn't find a way to work together. Now, only one is expected to receive

its request.

Hospital officials argue that West Virginia's equipment and

buildings, on average, are about 9 percent older than the national average, and

federal money was available for construction. It is hard to retrofit these

older buildings for new technology and more outpatient services, those

officials say.

Finally, the public demands high-tech service, even in small

hospitals, said Steven Summer, president of the West Virginia Hospital

Association. One reason managed care failed is because it tried to limit

patient choice, he

"The public said very clearly that we're not willing to accept

that [low] level of service," he

Summer wants to see the government actually pay hospitals the

full cost for treating patients covered by Medicare, Medicaid, Workers'

Compensation and other government programs. If that happened, then hospitals

wouldn't have to charge private insurance companies so much.

Lindsay has another idea, as well. He'd like hospitals to milk

more life from their existing infrastructure. He's not convinced that the shiny

He said he once was treated in an English hospital. The floors

creaked, the television set was ancient, he said, but the patient care was

among the best in the world.

"Everybody assumes, when people at a hospital say they need

something, it's for medical or scientific reasons," Lindsay

times, they just want it."

An unprecedented amount of money

Only half of all states have a Certificate of Need process.

With so few projects being rejected, is it even necessary?

Chambers said the process works. For example, groups of doctors

in other states have opened free-standing "surgi-centers" away from hospitals

to do profitable, routine surgeries — but not in West Virginia, at least not

yet, because of the CON process.

Also, two hospitals recently asked if they could offer open-

heart surgery in Parkersburg, but because of the CON process, only St. Joseph's

will be allowed to do so.

Chambers said the Health Care Authority is beginning to take a

harder look at CON requests. She said hospitals are asking for an unprecedented

amount of money.

"I don't think there was the level of scrutiny [before], as

there is now," Chambers

costs are going through the ceiling? And that I'm really concerned about how

many more people we're going to have uninsured than we already do?

Yes."

Last year, authority board members considered a six-month

moratorium on new CON applications, but rejected the idea.

The authority is beginning to make the following deal with CON

applicants — we'll approve your project, if you agree not to increase what you

charge patients by too much. Called "benchmarking," the idea is to make similar

kinds of hospitals charge similar rates by tying rate increases to how a

hospital compares with its peers.

Also, the authority is trying to create a map of health-care

an area really needs a certain capital improvement.

Some hospitals might have to change their mission, cut services

or close completely in order to cut health-care costs in the state, Chambers

communities.

"One of the big questions now is: If we're going to be building

asked. "It's a tough question. One of the concerns then is: How long do people

have to travel to get care?"

Lindsay said the Legislature could pass clearer laws that spell

out what is required to build a new facility or renovate a building. He also

health-care consumers.

But he doesn't expect any change soon. Powerful political

interests — construction companies, some labor unions and the hospitals

themselves — want more construction, more new equipment. Meanwhile, consumers

are disorganized.

Smith, the insurance executive, said he doesn't have an easy

answer but that an answer needs to be found.

"I'm not here to tell you which hospitals should or shouldn't

have their requests granted," he

it may be more of a burden than we can stand."

To contact staff writer Scott Finn, use e-mail or cal 357-

4323.