$1.3 billion in Detroit hospital upgrades could drive up health costs

A new report suggests that $1.3 billion in upgrades to hospitals in Detroit could drive up health care costs. The funding "may give a boost to Metro Detroit's languishing economy, but could also saddle residents with higher medical costs, according to an industry report funded by the United Auto Workers and Detroit's Big Three automakers," The Detroit News reports. "Workers and employers may end up paying for these projects with higher health insurance premiums, according to the report, released today by the National Institute for Health Care Reform, a Michigan nonprofit created by the UAW and the automakers."

The research was conducted by the Centers for Studying Health System Change. "Among the projects cited is the proposed $850 million upgrade to the Detroit Medical Center's hospitals -- spending that hinges on the DMC's sale to for-profit Vanguard Health Systems -- and Henry Ford Health's planned $500 million investment to develop land south of its Detroit hospital." The Voluntary Employees' Beneficiary Association, run by the UAW, was "created in 2005 to help pay for union retiree benefits " and "is the single largest purchaser of health services in the Metro Detroit, the report found" (Rogers, 8/26).

Crain's Detroit Business: "One factor that could alter the picture is whether Detroit hospitals can attract new patients from outside Southeast Michigan, said the report. 'If all the spending on capital improvements leads to increased use of high-tech services or additional costs from excess capacity, the end result might be higher private health insurance premiums, which could negatively impact employers and employees,' said Paul Ginsburg, president of Health System Change and the institute's director of research" (Greene, 8/26).

Meanwhile, "[a] part of health-care reform that prohibits physician ownership in hospitals has caused Nashville-area development companies that focus on medical projects to shift strategies," according to a reported column in The Tennessean. "Franklin-based Surgical Development Partners, for instance, had to pump in more equity from itself and other investors to replace financial interests that doctors would have owned in a hospital it plans for Austin, Texas. Brentwood-based Healthcare Management Directions has shifted its focus to partnering more often with hospital systems and hospitals instead of doctors. And University Medical Center in Lebanon, which is jointly owned by a hospital chain and doctors, is racing to complete a new outpatient surgery center by year-end, before restrictions on expansions by physician-owned hospitals take effect. … The industry has a pending lawsuit challenging the constitutionality of the provisions" (Ward, 8/26).