Lafayette Journal and Courier

Impact on health care costs is debated
By David Smith

October 5, 2005

The costs of building a new hospital and mothballing St. Elizabeth and Home hospitals will certainly be passed on to consumers, observers say.

But efficiencies of new construction, the possibility of competition from Arnett HealthSystems, and the relatively minor role construction plays in driving health care costs may keep any price increases from causing heart failure.

"One thing about building a new plant, you build a new plant with today's technology and today's processes," said Bob Morr Jr., vice president of the Indiana Hospital & Health Association.

Modern hospitals have computerized data systems that keep physicians and nurses instantly apprised of a patient's vital signs, test results, X-rays and other information. That reduces paperwork and increases the quality of care, he said.

"The reality is, in many places in Indiana and the United States, despite where we are in information technology in other industries, we're not there in health care. There's still a lot of paper being passed."

Although old hospitals can be retrofitted with new technology, that approach isn't necessarily the most inexpensive, Morr said.

"If you're going to borrow money, you may as well borrow money to bring all of the technology in."

Morr cited a 2004 study commissioned by the Indiana Hospital & Health Association that said hospital capital costs, while higher than the national average, make up less than 16 percent of the annual hospital health care costs.

Still, says James G. Anderson, a Purdue University professor of medical sociology and health communication, costs are bound to go up.

"Certainly hospitals are extremely expensive to build," he said. Although St. Elizabeth Hospital and Home Hospital are old, GLHS has spent millions renovating them in the past decade, he noted.

"In a sense, they're writing off those costs," he said.

Whether GLHS can recoup any of its investment on its existing properties remains to be seen.

"It's difficult to convert a hospital into apartments," Anderson said. In some locales, old hospitals have been converted into homes for the elderly or retirees, but that seems unlikely here.

"We have a number of new facilities for assisted living, so I would think that would not be a profitable thing for them to try to duplicate."

Despite the challenge of finding new uses for those old facilities, Gary Henriott, chairman of the Lafayette-West Lafayette Economic Development Corp., sees Tuesday's announcement as good news for consumers.

Henriott said he received a call from Terry Wilson, executive director of GLHS, just before the hospital announcement Tuesday. He said Wilson told him the new hospital will be sized appropriately given that a second hospital may be built by Arnett Clinic and a partner corporation.

"I think it's good that any new construction be right-sized for the medical community," Henriott said. He also said the new-found spirit of cooperation between GLHS and Arnett bodes well for consumers.

Vicki Ludwig, a laboratory technician for Arnett Clinic, said the announcement that GLHS will close the two existing hospitals took her by surprise. She isn't concerned the new hospital will boost health care costs because she believes Arnett someday will build its own.

"I'm all for the competition. I think right now GLHS has a monopoly."