Are Columbus hospital expansions good for patients? Buckeye Institute questions costs

If your health care costs are going up, it could be because you're paying for your hospital's upgrades.

The Buckeye Institute, an Ohio conservative think tank, released a memo last week detailing hospital costs, such as new construction, advancing medical technology or updated amenities, as one of the largest single drivers of higher health care prices – especially in cities like Columbus with so few competing hospital systems all undergoing major development projects.

OhioHealth, The Ohio State University's Wexner Medical Center, Nationwide Children's Hospital and Mount Carmel Health System are investing billions in building new medical centers and updating their existing hospitals, which all have said is to accommodate Central Ohio's growing population.

Consolidation is king

Roughly 30% of health care spending in the United States is on hospital costs, according to a study from the Centers for Medicare and Medicaid Services, compared to 20% for physician and clinical services and 9% for retail prescription drugs.

This, argues Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute, is due to consolidation. With less competition, thanks in part to larger hospitals buying up smaller practices, hospitals can afford to charge patients and insurance companies more for their services.

A 2024 RAND study found that Ohio hospitals already charge commercial insurers over 275% of what they charge Medicare, a federal program, for the same services.

More: Columbus health systems invest billions to keep up with central Ohio growth

A Kaiser Family Foundation poll in late February showed that nearly 75% of adults “worried about being able to afford unexpected medical bills… and the cost of health care services." Approximately half of adults said that “health care costs are a major reason for their negative views of the economy.”

The solution, according to Hederman, is for policy makers to subject hospitals to stricter cost-benefit analyses for major expansions and how they'll actually serve patients, as well as putting policies in place that help make the hospital market more competitive.

Rising labor, drug costs hitting hospitals hard

John Palmer, spokesperson for the Ohio Hospital Association, pushed back on the idea that hospitals are charging simply because they can.

"Hospitals have experienced significant cost surges in recent years, including increases in labor costs of 20.8% and pharmaceuticals 19.7% between 2019 and 2022," Palmer said in an emailed statement. "This has resulted in more than half of Ohio hospitals incurring operating deficits in 2023, while other sectors of the health care economy, including commercial insurance companies, enjoy record profits."

"Despite this discrepancy, hospitals are the only sector of the health care system that are available to patients 24 hours a day, seven days a week," Palmer said in a statement.

The Ohio State University Wexner Medical Center also noted the "significant increases" in the costs of labor, drugs, supplies and medical equipment.

"With this region’s rapidly increasing population and Ohio’s aging population, area hospitals must grow to meet community needs," said Marti Leitch, an OSU spokesperson, in an emailed statement.

In the memo, Hederman calls out OSU specifically and their nearly $2 billion hospital tower that will add more than 800 patient beds to the health system. But an American Hospital Association study published in 2017, Hederman notes, showed that hospital occupancy declined nationally between 1975 and 2015.

That's not the case for the Columbus area, according to OSU. Their health system is consistently 90% occupied or more, Leitch said in a statement, "Hospital occupancy is far higher in central Ohio than the outdated national statistics referenced by the Buckeye Institute," she said.

This article originally appeared on The Columbus Dispatch: Columbus hospital expansion costs questioned by Buckeye Institute