Health care: physician, heal thyself.

• Position: North Carolina's healthcare industry - Industry Overview

A healthy dose of competition provides some relief in lieu of Dr. Clinton's remedy.

Kaiser Foundation Health Plan members got an unusual letter recently. "Dear Subscriber," it began, "this is to advise you there is no rate change for your plan for 1995."

At Duke Medical Center, 1,500 employees got letters, too. Theirs told them they would lose their jobs as the state's largest hospital scrambled to cut $70 million a year in operating costs. CEO Mark Rogers says the layoffs are a response to cost-cutting pressure from insurers and health-maintenance organizations such as Kaiser.

"We saw the real awakening of competitive forces in the industry," says Jim Hazelrigs, director of the North Carolina Medical Database Commission.

Those forces are primarily responsible for the moderation in rising health-care costs. By September, costs were increasing 4.9% for the year, comparable to 4.7% a year earlier. Hazelrigs expects the total medical bill for the state in 1994 to approach $21 billion, compared with slightly more than $20 billion in 1993. The relative stability, coming after average annual increases of 16.1% in the late 1980s, was the result of sweeping change.

Like a number of other hospitals, Wesley Long in Greensboro and Pitt Memorial in Greenville decided not to raise room rates for 1995. Presbyterian and Mercy hospitals in Charlotte announced their smallest increases since 1984, 3.9% and 5.5%.

None of the state's 142 hospitals closed, not even any of the small, money-strapped rural ones, says Steve Morrisette, executive vice president of the North Carolina Hospital Association. But many took refuge by forging alliances with regional medical centers. "An awful lot of hospitals are changing significantly," Morrisette says. "They're moving more to outpatient and home-based services to survive."

In 1994, the average hospital stay was 5.8 days, down from 6.4 days in 1990. Benefiting from the trend, 370 nursing homes are expected to increase capacity to 38,000 patients in 1995, up from 36,000 in 1994. "You see the impact most in an increase in subacute units," says Amy Thomas, director of the North Carolina Health Care Facilities Association. "A patient goes in a hospital for an operation, and as soon as [the patient is] medically stable, transfers to a nursing home to recuperate." Nursing-home charges run $100 to $200 a day; hospitals, about $1,900.

Hazelrigs says the Database Commission began tracking outpatient surgery two years ago. He...