Higher hospital fees further push medical costs to consumers

Blue Shield of California members are paying more for services at San Jose Medical Center than any other hospital in San Jose.

The move is the latest example of a trend toward pushing the rising cost of medical care onto consumers.

The next step after hospitals are doctors, industry experts say.

Blue Shield started its network choice plan this month by categorizing hospitals as "choice" or "affiliated," depending on how much they charge to deliver care. Out of about 350 hospitals in the state estimated to be in the Blue Shield network, 53 hospitals are listed as affiliated.

The plan applies to all hospital services except emergency care.

Affiliated hospitals are considered by Blue Shield as the most expensive in the market, meaning members who go there have to share more of that higher cost.

In Silicon Valley, two hospitals are on Blue Shield's affiliated list -- San Jose Medical Center and Washington Hospital in Fremont. Two hospitals in Monterey County are also on the list -- Community Hospital Monterey Peninsula and George L. Mee Memorial Hospital.

"We saw the cost of health care exploding last year," says Tom Epstein, spokesman for Blue Shield. "And 40 percent was in hospital costs."

The changes in hospital designation were made on all plans for commercial groups up to 300 employees and individual plans. Next year the company plans to roll out network choice to large employer groups, executives say.

The maximum any member would pay is $700 on top of any other deductibles, says Mr. Epstein.

Blue Shield's objective is to provide choice for consumers, but make them pay more for services at hospitals deemed more expensive in a particular market.

If a hospital lowers its prices, it could renegotiate its contract with Blue Shield and get listed on the "choice" network during midyear, Mr. Epstein says.

PacifiCare started the trend late last year with a new product it introduced in November that had a network of "select" hospitals. If a hospital wasn't on the select list, it would cost the member as much as $400 a day. In Santa Clara Country, O'Connor and Saint Louise hospitals were the only hospitals on PacifiCare's select list.

Healthnet of California and Cigna Healthcare plan to introduce similar products next year. San Jose-based Lifeguard is taking a look at doing the same with surgery centers, labs and diagnostic facilities; Blue Cross of California is taking a wait-and-see attitude.

All these changes are related to the rising cost of medical care, reaching 15 percent a year, with no end in sight.

Most of those costs were passed onto employers last year with premium increases as high as 12 percent, almost triple California's inflation rate of 4.3 percent, according to the Kaiser Family Foundation and the Health Research and Education Trust 2001 employer survey.

But in a slow economy, employers are not as willing or able to absorb some of those increases. So employees can expect to pay more for their health care.

"I'm working on a case right now that will save an employer $1 million with the Blue Shield plan," says Peter Kuhn, health insurance broker with IBP Insurance Services in San Jose. "Businesses are still struggling in this business environment. And if they can save 10 percent on their benefits, they will."

PacifiCare plans to release quality-of-care reports on hospitals this summer, and the company is developing another product that tiers medical groups in California the same way it tiers hospitals. The new product would introduce quality-of-care information into the formula, along with cost, to determine which medical groups would be on the "select" lists, says company spokeswoman Cheryl Randolph.