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Minnesota hospitals in a building boom
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Blue Cross Blue Shield of Minnesota says since 2002, more than one-third of the state's hospitals have started new building projects. (MPR file photo)
The state's largest health insurer says Minnesota hospitals continue to expand at a fast pace, especially in a few specialty areas. In a new report released Thursday, Blue Cross Blue Shield of Minnesota says since 2002, more than one-third of the state's hospitals have started new building projects. Blue Cross estimates the projects cost almost $1.4 billion. The insurer says it is watching those costs to see if they are contributing to the rising cost of health care.

St. Paul, Minn. — Blue Cross Blue Shield scaled back its original numbers Thursday, after some hospitals complained that the insurer had overstated hospital building expenses. In its initial report, Blue Cross said hospitals were spending nearly $1.8 billion on construction projects. But a few hours later, Blue Cross revised that figure to $1.37 billion.

Blue Cross Senior Vice President Michael Morrow says, either way, hospitals are spending a lot of money on buildings. And he says they have been doing so for at least six years. That's how long Blue Cross has been tracking hospital construction spending.

The company issued its first report on the trend in 2002. That report estimated that during a similar three-year time period, hospitals spent $1.5 billion on new construction. Morrow says that kind of expansion spending is unprecedented in Minnesota.

Minnesota hospitals are focusing much of their construction spending in a few select areas, such as orthopedic and cancer units. New cardiac units are the most popular building projects.

"The number from both 2002 and today is a quantum amount higher than historical amounts, and doesn't necessarily show signs of abating," Morrow said.

The report says Minnesota hospitals are focusing much of their construction spending in a few select areas, such as orthopedic and cancer units. Morrow says new cardiac units are the most popular building projects.

"If you look at the national average, we have 28 percent more cardiac intensive care beds in Minnesota than overall," Morrow said. "Part of it could be disease. But part of it is, also, it's an attractive area of practice."

Morrow says cardiac units are attractive because they are big moneymakers for hospitals. Bruce Rueben, president of the Minnesota Hospital Association, does not dispute that.

"Under the way health care financing works today, hospitals have no choice but to get into services that return a surplus," Rueben said.

Rueben says it's no surprise that money-losers like mental health care are not targets for expansion. He says they would be if insurers like Blue Cross Blue Shield changed the way they reimburse hospitals.

"A pretty simple and direct solution would be to pay more for psychiatric services," Reuben said. "Perhaps they're overpaying for the cardiac side. Hospitals are simply responding to the incentives that are in the system of financing health care."

In its report, Blue Cross Blue Shield acknowledges that, as a health insurance payer, it does influence some of the decisions hospitals are making. That's one of the reasons why the insurer says it is involved in this issue.

Blue Cross has forwarded its report to the Citizens' League. The insurer has asked the nonpartisan group to assemble a special panel to come up with recommendations for ensuring hospital expansions are in the state's best interest.

League President Sean Kershaw says the Blue Cross report raises a number of great public policy questions.

"Maybe we want more cardiac beds. I mean maybe that's the outcome we need. I think there's a good argument that on some things, like mental health facilities, we clearly don't have what we want," said Kershaw. "The bottom line is, is there a process that brings all the stakeholders together, that helps to answer that question in a way that's sort of in the public's interest, and is better than what we've got right now?"

Kershaw says the panel will look at capacity issues at all medical facilities in the state, not just hospitals. He says the group will also rely on other sources of data besides the Blue Cross Blue Shield report.

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