Medical Technology Arms Race

post from TPMCafe on 03 November 2009 12:02:00 PM. © TPMCafe

Blog_CT_Scan_Cost I must say I'm worried that the Democrats are setting a trap for themselves on Health Care Reform by not really confronting the issue of cost inflation. Why does a CT Scan in America cost so much more than any other country. And it's not just scans, it's the whole range of services. Although it's very hard to find, there is certain anecdotal evidence that part of the problem is an oversupply of hospitals and medical technology providers. Take Washington, DC for example.

The Washington, D.C., hospital sector has an excess of hospital beds and a concentration of services at the high end. Four community hospitals; three academic medical centers; a large, nonacademic tertiary care hospital; five specialty hospitals; and a public general hospital all compete to serve a city with a population of only 500,000. In addition, there are two military facilities. Forty percent of patients in this market are drawn from the adjacent Maryland and Virginia suburbs.

In the Libertarian's "perfect market" pipe-dreams, an oversupply should drive down costs of individual services. But that's not what happens. Each hospital that has invested millions in buying CT Scanners must amortize the cost over fewer patients by raising the cost of each scan. The same problem is plaguing Pittsburgh.

The region's hospitals are trying to add nearly 1 million square feet of clinical space between 2006 and 2009 -- a construction boom that is raising questions about a potential oversupply of costly hospital resources...
"There happens to be a lot of construction going on, but most of it deals with aging plants and the need to stay current with advances in technology," said Ms. Riefner, who helps hospitals obtain financing for capital projects. "It's not a matter of just spending money for the sake of spending money -- they truly want to deliver the best possible care that they can."

So all the region's hospitals are caught in a technology arms race. No one is trying to figure out how many CT Scanners we need in a region and normal market mechanisms that would punish hospitals or clinics for spending too much on technology don't work because we don't have single payer system that disciplines the free market in every other developed country.

So are we about to pass a big giveaway to the hospitals, insurance companies, and pharmaceutical firms without any way to control the medical technology arms race?