Hospitals and Health Costs: It's All About Jobs, Stupid

(MoneyWatch)  If you wonder why health costs continue to rise rapidly, even in the midst of the worst recession in half a century, you need look no further than the events unfolding in the Hartford, CT, healthcare community.

Connecticut lawmakers are considering a proposal from University of Connecticut (UConn) Health Center to merge with Hartford Hospital. The deal would include the construction of a new acute-care facility to replace the aging John Dempsey Hospital, part of UConn Health Center. The merger would cost the state an estimated $605 million over 10 years, including $475 million for the new hospital.

Two other local hospitals oppose the proposed facility, arguing that it would siphon off patients with private insurance from their institutions. Some state legislators also question the deal, saying the state can't afford it. But other lawmakers are excited about the prospect of creating thousands of new jobs. According to a UConn-sponsored study, the new partnership, which would create university-affiliated campuses in Hartford and nearby Farmington, would generate 2,688 jobs and $717 million a year in new area income by 2020.

The merger idea grew out of the financial losses that UConn Health Center has incurred in the past several years. Three times since 2000, the state had to bail out the academic medical center, which is running a deficit of nearly $17 million for the current fiscal year. The plan proposed by UConn and Hartford Hospital, and supported by Hospital of Central Connecticut, rests on the assumption that the decline of John Dempsey Hospital threatens the Health Center, and that the demise of UConn's medical and dental schools would drag down the entire local healthcare industry.

To sweeten the deal for the legislature, Hartford Hospital has offered to take responsibility for future Health Center deficits, while the state would pay the new hospital's bonding costs and about $13 million a year in labor costs. Interestingly, Hartford Hospital and other area facilities killed an earlier UConn proposal to build a new hospital to replace John Dempsey. Now just two institutions, St. Francis Hospital and Medical Center in Hartford and Bristol Hospital in nearby Bristol, remain in opposition.

Even more interesting, Hartford Hospital, Hospital of Central Connecticut, and St. Francis Hospital and Medical Center all staff considerably fewer beds than they're licensed for. In fact, together they have 352 unstaffed beds, exactly the number that UConn sought in its original proposal for a new hospital.

This is not to say that the other hospitals could completely replace Dempsey--although Hartford Hospital is a tertiary care facility that does transplants, among other things. But, while it might be inconvenient for medical students and faculty to travel a few miles to train at another facility, there doesn't appear to be any need for more beds in the market. What's needed is a cash source to sustain the medical school.

One other irony: The proposal would allow the new hospital to be exempted from the state's own certificate-of-need process. The Connecticut Office of Health Care Access would conduct an "expedited review," in which third parties would have no input. So if the project goes forward, nobody will ever know whether the construction of the hospital was justified.