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Healthcare spending growth driven by rise in frequency of use, intensity of services, AHA report says

Sharp growth in insured rate, aging population and chronic disease are major factors in spending, though stats suggest effort to control costs.

Beth Jones Sanborn, Managing Editor

Healthcare spending was driven by increased use and intensity of the services provided in 2014 and 2015, and providers face serious challenges in reducing the cost of care, especially escalating drug prices. That's the word from the American Hospital Association's February 2017 Cost of Caring report.

The report showed several forces behind the increased use and intensity of services, including the sharp growth in insurance coverage since 2010 of 21-22 million people. Additionally, the aging population is using more healthcare, and medical advances that no doubt yield benefits can also bring with them price hikes.

Finally, roughly half of Americans have a chronic condition like diabetes or heart disease. These illnesses often require multi-pronged solutions that mean more doctor visits, intensive therapies and care.

[Also: CMS: Health spending growth will outpace projected growth in GDP]

However, several statistics point to efforts by hospitals to control costs. For instance, hospital price growth in 2015, as measured by the Hospital Producer Price Index, was .9 percent, a 13-year low and a notable drop from the rate of 4.4 percent in 2006, the report said.

Growth in Medicare spending for all hospital services, both inpatient and outpatient, is at a 17-year low, and inpatient spending dropped 1.9 percent in 2015.

Finally, overall spending growth for hospital care, which clocked in at 5.6 percent, was less than the healthcare average  of 5.8 percent, the report said.

[Also: Healthcare job growth plummets in January, breaking down the numbers]

Serious challenges are confronting providers that make it difficult to keep costs down, and drug prices and regulatory compliance spending stand out, the report said. Inpatient prescription drug spending spiked 38.7 percent per admission between 2013 and 2015, such as the inpatient price of Nitropress, a drug used to lower blood pressure, which rose a whopping 672 percent between 2013  and 2015.

Electronic health records have proven to be major investments for numerous providers in recent years. AHA estimates show that from 2010 to 2014 hospitals spent over $47 billion annually on IT. Increasing regulatory requirements are also fueling increases in administrative expenses and compliance staffing demands, the report said.

Not surprisingly though, wages and benefits of hospital staff account for almost 60 percent of inpatient costs, which the AHA said reflects the crucial role these people play in patient care.

Twitter: @BethJSanborn