Hospital fees will rise this year by almost seven percent — an increase described by Shadow Finance Minister Bob Richards as "huge" for the people of Bermuda.

The new in-patient, out-patient and physician charges were approved in the House of Assembly on Wednesday.

Health Minister Nelson Bascome said health care inflation continued to outpace general inflation and that was taken into consideration by Bermuda Hospitals Board (BHB) in seeking the 6.95 percent increase in fees, alongside the real cost of services.

He said the rise was justified because almost 60 percent of BHB's operational costs went on salaries and employees benefits and payroll costs would increase by 5.25 percent this year, in line with government pay awards.

"This will amount to an additional salaries and benefits expense of $6 million," said Mr. Bascome. He added that meeting quality service standards in care would eat up another $1.7 million, maintaining the physical plant would require $1.45 million and the rising cost of medical supplies and other operational expenditures would account for another $4.2 million.

"The impact of these initiatives adds over $13.4 million to the cost of operations for 2009/10. The total of these requests amounts to a 6.95 percent increase to cover these increased costs."

He later broke it down as a base increase of 4.95 percent plus one percent for the cost of a new hospital and one percent to support staffing and services.

The Minister explained that the King Edward VII Memorial Hospital was moving to a new system of billing patients, known as "in-patient reimbursement", which would be revenue neutral to BHB and more efficient.

"The BHB will not receive any additional income but it will redistribute a portion of responsibility for payments from Government to commercial insurers," he said, adding that the system would classify patients into diagnosis-related groups so they were charged for the resources they used. He said it was a system used by many countries, including the US.

Mr. Richards derided the "revenue neutral claim", asking how the Minister could possibly know who was going to become ill with what in the future.

"It seems to us over here that it's anything but revenue neutral. It's going to be a huge increase for the people of Bermuda."

He was critical of the new billing method, saying it could lead to "mind-boggling bills" and claiming it was one the US was planning to move away from.

Referring to the increased fees, he said: "It seems to me that the prices of some of these services are totally arbitrary. If it's arbitrary then the Minister should say so."

Opposition MP Grant Gibbons said it was unfortunate that the increases were coming at a time when the country was dealing with "some of the tribulations of a severe economic downturn".

And he warned that it would lead to increased premiums from private health care insurers. "They simply can't afford to absorb that kind of increase," he said.

Shadow Health Minister Louise Jackson said she was pleased the hospital was getting its finances on track but it was a pity the increase had to come in the middle of a "deep recession". She said: "The fees seem to be fairly exorbitant in some respects."

An amended law was also passed on Wednesday allowing the fees to be placed for public inspection at KEMH and at government libraries. They will also be published at www.gov.bm and www.bermudahospitals.bm