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Healthcare spending, price growth slows in 2017 but job growth spikes

Altarum report finds spending grew by only 4.6 percent in 2016.

Beth Jones Sanborn, Managing Editor

Healthcare spending growth slowed in 2016, and the trend appears to be continuing, according to the August 2017 Altarum Institute Center Health Sector Trend report.

According to the report, spending grew by only 4.6 percent in 2016 and estimates based on new data have the downward trend continuing with growth for the first half of 2017 at 4.4 percent. Altarum said the estimates illustrate the impact of expanded coverage, and its subsequent leveling off, on healthcare utilization. Coverage expansion was concentrated in 2014 and 2015, leading to a jump in health services utilization. That peaked at at 5.1 percent in 2015. 

[Also: Health system leaders focused on managing costs, improving use of data]

"Coverage leveled off in 2016 and, in response, the growth in health services utilization has been trending back toward pre-expanded coverage rates," Altarum said.

Healthcare price growth has also dropped in 2017, from 2 percent in the first quarter to 1.6 percent in the second quarter.

[Also: Medical costs to accelerate in 2018, but only slightly, as cost trends stabilize, says PwC]

Though much higher than healthcare services, prescription drug price growth slowed to 3.6 percent in the second quarter 2017. However it is important to note that the impact of rebates are not reflected in these data, and that drug pricing controversies like the one surrounding Mylan's EpiPen were recently resolved and some generic alternatives have been made available at lower prices.

Finally, health employment grew an average of 21,000 jobs per month during the first 5 months of 2017 then unexpectedly rebounded to 38,000 in June and July. The jump in June and July was a surprise, and was focused mainly in ambulatory settings.

[Also: Hospitals tighten controls on health benefits amidst rising costs, changing industry landscape]

"Growth averaged 32,000 during 2015 and 2016, and the decline in monthly growth during the first 5 months of 2017 was expected due to slower growth in health care utilization driven by the leveling off in expanded coverage," Altarum said.

The American Hospital Association's February 2017 Cost of Caring report also illustrated the increased utilization in 2014 and 2015, due to expanded healthcare coverage and more intense utilization of services like chronic disease management.

However, the report mentioned that statistics also suggested that hospitals are trying to hold costs down. 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.

So it is possible that along with a leveling off of coverage and utilization, successful hospital attempts at stabilizing or reducing cost of care could be responsible for the lower spending. The slowing in hospital price growth in the Altarum report is also illustrative of these theories.

However, the hospital industry faces serious challenges that can slow efforts to reduce costs, including drug prices and regulatory compliance, the AHA report said.

Electronic health records have also proven to be big resource absorbers for providers. 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 AHA report said.

Twitter: @BethJSanborn
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