Managing Health Care Costs: Private Sector Innovations

By Sean Sullivan; Polly M. Ehrenhaft | Go to book overview

Utah Health Cost Management
Foundation

Health care costs in Utah are below the national average by numerous measures. Hospital expenditures per capita and per admission are 20- 25 percent lower, partly because of much lower utilization, that is, fewer admissions and shorter lengths of stay. Nevertheless, the trend of health care costs in Utah is similar to that in the rest of the nation, with per capita hospital expenditures growing faster than the national average. The rapid rise of costs has helped to drive the state's Medicaid budget up at an average rate of more than 20 percent a year since 1976, while employers have been absorbing 15-30 percent annual increases in health insurance premiums.

This situation concerned community leaders who wanted to keep the state's budget balanced and keep employment costs down to attract new business. Many states in similar straits have enacted rate review statutes to regulate hospital prices, thus moving the health care system toward a public utility model. Utah has not historically favored government regulation in most sectors of the economy; so in 1978 the legislature commissioned a study to determine the extent of health care cost increases in the state and to recommend remedial actions. The final report -- by Lewin and Associates -- recommended passage of a certificate-of-need statute as an interim measure to contain costs and avoid the loss of federal funds; more important, the report urged formation of a private group to act as a catalyst for a market-oriented approach to containing costs in the longer run. In 1980 the Utah Health Cost Management Foundation (UHCMF) was formed to play this role.

The UHCMF is a coalition of major employers, employee groups, insurers, and providers. It was established with a grant from the John A. Hartford Foundation to stimulate market forces to make the health care system more competitive. Its board of directors reflects the broad array of interests that have been gathered into one organization; there are representatives of the Utah State Medical Association, the Salt

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