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Blue Cross: New hospital in GF could increase costs

The head of Blue Cross Blue Shield of North Dakota said Wednesday that he fears the new hospital at Grand Forks' Aurora Medical Park might raise the cost of health care in the area.

The head of Blue Cross Blue Shield of North Dakota said Wednesday that he fears the new hospital at Grand Forks' Aurora Medical Park might raise the cost of health care in the area.

In the long run, president Mike Unhjem said, that could push insurance premiums upward.

Whether this would happen or not depends on whether the 70 beds in the new hospital would result in excess capacity in the region. Blue Cross Blue Shield staff is compiling a report to find out.

Aurora representatives have said their intention is to capture the market outside Grand Forks and attract area residents that now travel to Fargo and other places for health care. Altru Health System, which has 261 beds in its hospital, has disputed that.

There are about 1,600 hospital beds in the region, though how much use they see is what Blue Cross Blue Shield wants to know.

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The company is North Dakota's biggest health insurance company, insuring 54 percent of residents.

One of the key arguments in the debate over whether the Grand Forks City Council should subsidize the Aurora hospital or not is that additional competition in health care services would be good for patients. What hasn't been discussed extensively is whether competition would result in lower costs as normally occurs in a market economy.

In his experience, Unhjem said the answer is "no."

That's because economic incentives are turned upside-down when it comes to health care. Prices tend to go down when consumers choose the best quality goods for the lowest price. But in health care, consumers don't pay directly. Their insurance companies do.

"The consumer is insulated completely from the cost of the care," Unhjem said. "The consumer rarely, if ever, asks what's it going to cost before receiving services."

At the same time, he said, "we also have an interesting psyche in the American consumer. If it's more expensive, it's better."

Through the years, what the insurance industry has seen is that whenever there is excess capacity, health care providers end up trying to get more out of insurance companies in what Unhjem calls "the battle of the coding staffs."

A coder is someone who determines where medical services provided fall in the insurance company's codes, which determines how much the company reimburses.

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Health care providers train their staff to be as aggressive as possible without committing fraud, according to Uhnjem, and insurance companies train their staff to be as conservative as possible in reimbursements.

Signs of excess

There are some signs already the Grand Forks region may have excess capacity.

First and foremost is the declining population. According to Blue Cross Blue Shield research, the population of northeast North Dakota has dropped nearly 12 percent in the past five years while northwest Minnesota's population has dropped 5 percent.

The population has been aging, but that appears to have been countered by the fact that patients tend to spend less time in hospitals. More advanced medicine and, to some extent, insistence by insurance companies, has led hospitals to discharge patients earlier than in the past.

Some rural hospital administrators the Herald contacted confirmed that they have seen this trend toward more empty beds in their facilities in recent years. They said they doubted that Aurora hospital would accelerate this trend significantly, though.

If Blue Cross Blue Shield does find there would be excess capacity, one option it has is to not contract with the Aurora hospital, according to Unhjem. For customers, what this translates to is a significant economic incentive not to use Aurora. The insurance company pays only 80 percent of what it normally reimburses for non contracted hospitals.

Ultimately, though, if the overall cost of health care continues to rise in the region, premiums would have to increase, Uhnjem said. The company's premiums, he said, are based on the average cost of health care in the previous three years.

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Tran reports on City Hall. Reach him at (701) 780-1248 or ttran@gfherald.com or see his blog at www.areavoices.com/gfhcitybeat .

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