The Nation's 100 Most Expensive Operating Rooms, Reported by Calif. Nurses Assn.

Business Editors/Health/Medical Writers

OAKLAND, Calif.--(BUSINESS WIRE)--May 15, 2003

Investor owned hospitals and large hospital systems dominate a list of the 100 most expensive operating rooms in the U.S., as reported in findings released today by the California Nurses Association and the Institute for Health and Socio-Economic Policy (IHSP).

The research reveals that hospitals across the U.S. are marking up their Operating Room gross charges by more than 220% over their costs, making operating room charges a significant contributor to rising health care costs, said the CNA and IHSP.

Operating Room charges have also been escalating, at least in California, according to separate CNA/IHSP research in California that shows surgery charges up by 13% in the most recent year data was available.

Nationally, for-profit hospitals comprised 61 of the top 100, of which 44 are owned by the nation's two largest investor-owned systems, Tenet Healthcare and HCA -- The Healthcare Company. For-profit hospitals accounted for 9 of the top 10 in markups over costs. Multi-hospital systems made up 79 of the top 100, suggesting a strong correlation between both for-profit and large hospital chains and high markups on Operating Room charges.

The top 10 most expensive hospitals on the list by gross charge to cost ratio are:

-- Tempe St. Luke's, Tempe, Ariz. (Iasis Healthcare), 1020%

-- Doctors Medical Center, Modesto, Calif. (Tenet), 974%

-- Doctors Hospital, Manteca, Calif. (Tenet), 940%

-- Ft. Walton Beach Medical Center, Fort Walton, Fla. (HCA), 920%

-- Redding Medical Center, Redding, Calif. (Tenet), 897%

-- St. Luke's Medical Center, Phoenix, Ariz. (Iasis), 885%

-- San Dimas Community Hospital, San Dimas, Calif. (Tenet), 881%

-- Garfield Medical Center, Monterey Park, Calif. (Tenet), 881%

-- Calhoun-Liberty Hospital, Blountstown, Fla., 835%

-- Hughston Sports Medicine Hospital, Columbus, Ga. (HCA), 818%

For the full list of the top 100, see the CNA website, www.calnurse.org.

The CNA/IHSP research for the top 100 is based on examination of federal reports for approximately 4,500 U.S. hospitals in fiscal years 1999-2000, -- current as of Dec. 31, 2002 -- the most recent year for which the data is available.

Tenet hospitals comprised 25 of the top 100 and 5 of the top 10. HCA ranked second with 19 hospitals. Florida hospitals had the highest average markups at 334%, followed by California with average gross charges of 325% over cost. One-third of the top 100 hospitals, 34, are in California, followed by Florida, 15, and Pennsylvania, 13.

Operating Room services are substantial revenue and profit centers for hospitals. "The wide disparity in gross charges from one hospital to the next suggests that some hospitals clearly view operating room services as a product where the market will bear higher prices and from which they can extract disproportionate profits," said IHSP Executive Director Don DeMoro.

Notably, there was no apparent correlation between high charges and patient acuity (severity of illness) or hospitals that have received high marks for quality. In marked contrast to the predominance of investor systems, large teaching hospitals and large public hospitals, which tend to have sicker patients in greater need of various surgical and medical procedures, are virtually absent from the top 100 list. Additionally, only 6 of the top 100 on high charges appeared on the widely used HCIA-Sachs list of top 100 hospitals for quality patient care.

High markups on Operating Room charges may encourage high volume and tempt some hospitals to artificially increase that volume, noted CNA. For example, Tenet's Redding Medical Center, the subject of an investigation over whether the hospital has performed unnecessary heart operations, ranks high on the Top 100 list.

Beyond the implications for patient safety, DeMoro cited significant public policy concerns. "These escalating mark ups on Operating Room costs, coupled with substantial hospital sticker prices on prescription drug costs, indicate that like many HMOs and pharmaceutical firms, many hospitals -- particularly those in large investor chains -- are pushing overall health care inflation."

"The effect on patients and consumers can be devastating," said CNA President Kay McVay. Reports this week noted nearly 60 million people lack health insurance at some point in the year, and that hundreds of thousands of retired workers and their dependents are facing the loss of their health care benefits. Overall job-based health premiums are expected to rise 14% this year.

The research documents gross charges, not reimbursements. But gross charges are a key component of the reimbursement calculations used by Medicare and other payers that determine actual payments, said DeMoro. "By setting higher charges, the hospitals with big mark ups spur everyone to mark up their gross charges, driving up health costs for everyone."