By Dave Barkholz | July
17, 2017
Hospital cost-cutting and competition have caused healthcare
prices to slip to their lowest rate of growth in a year, according to a new
report from the Altarum Institute.
Prices across hospitals and in other healthcare sectors rose just 1.6% in May compared with a year ago, which is the slowest rate of increase since June 2016, according to Paul Hughes-Cromwick, Altarum's co-director of the Center for Sustainable Health Spending.
Hospital prices increased at an even slower rate than general healthcare costs at 1.5% in May, Hughes-Cromwick said. That compared with 1.8% in April, which has driven down the 12-month moving average for healthcare prices to 1.9% for the third straight month.
Hospitals are reining in prices for a variety of reasons, Hughes-Cromwick said. They have been cutting costs for several years so that they can still earn good margins on their business even if prices slow, he said.
Consumers also are demanding better price transparency and shopping for hospital procedures based on price, Hughes-Cromwick said.
That trend will only accelerate as more and more consumers have high-deductible insurance that forces them to pay the first $1,000 or more of their healthcare costs before insurance starts paying the better part of the tab, he said.
The trend will also continue as congressional proposals to repeal and replace the Affordable Care Act stand to increase the number of uninsured Americans, which will force hospitals to be even more competitive in the quest to score customers, Hughes-Cromwick said.
"It appears that in addition to the significant uncertainty introduced by the continuing Affordable Care Act repeal-and-replace saga, economy-wide prices are once again putting downward pressure on healthcare prices," Hughes-Cromwick said in an analysis of the price report.
Healthcare prices have moderated over the past three months to the point where they are increasing just a shade above the general rate of inflation of 1.4%.
Hughes-Cromwick said that for healthcare to remain affordable over time that trend needs to continue.
Healthcare spending represents about 18.2% of the gross domestic product.
Altarum pays particularly close attention to hospital price trends because the sector represents about one-third of healthcare spending.
Hospital prices for privately insured patients rose at an annual growth rate of 2% in May, the lowest reading since June 2015, according to the analysis.
"There is evidence of deteriorating hospital admissions trends which, in conjunction with fears over accelerating uncompensated care should ACA repeal be enacted, could be affecting the behavior of hospitals. All told, it is difficult to imagine healthcare prices accelerating anytime soon," according to the study.
Prices across hospitals and in other healthcare sectors rose just 1.6% in May compared with a year ago, which is the slowest rate of increase since June 2016, according to Paul Hughes-Cromwick, Altarum's co-director of the Center for Sustainable Health Spending.
Hospital prices increased at an even slower rate than general healthcare costs at 1.5% in May, Hughes-Cromwick said. That compared with 1.8% in April, which has driven down the 12-month moving average for healthcare prices to 1.9% for the third straight month.
Hospitals are reining in prices for a variety of reasons, Hughes-Cromwick said. They have been cutting costs for several years so that they can still earn good margins on their business even if prices slow, he said.
Consumers also are demanding better price transparency and shopping for hospital procedures based on price, Hughes-Cromwick said.
That trend will only accelerate as more and more consumers have high-deductible insurance that forces them to pay the first $1,000 or more of their healthcare costs before insurance starts paying the better part of the tab, he said.
The trend will also continue as congressional proposals to repeal and replace the Affordable Care Act stand to increase the number of uninsured Americans, which will force hospitals to be even more competitive in the quest to score customers, Hughes-Cromwick said.
"It appears that in addition to the significant uncertainty introduced by the continuing Affordable Care Act repeal-and-replace saga, economy-wide prices are once again putting downward pressure on healthcare prices," Hughes-Cromwick said in an analysis of the price report.
Healthcare prices have moderated over the past three months to the point where they are increasing just a shade above the general rate of inflation of 1.4%.
Hughes-Cromwick said that for healthcare to remain affordable over time that trend needs to continue.
Healthcare spending represents about 18.2% of the gross domestic product.
Altarum pays particularly close attention to hospital price trends because the sector represents about one-third of healthcare spending.
Hospital prices for privately insured patients rose at an annual growth rate of 2% in May, the lowest reading since June 2015, according to the analysis.
"There is evidence of deteriorating hospital admissions trends which, in conjunction with fears over accelerating uncompensated care should ACA repeal be enacted, could be affecting the behavior of hospitals. All told, it is difficult to imagine healthcare prices accelerating anytime soon," according to the study.
Dave Barkholz is Modern Healthcare’s Southern
Bureau Chief stationed in Nashville. He covers hospitals, doctors, suppliers
and governance across the Southeast. A winner of numerous national journalism
awards, Barkholz started his career at Modern Healthcare in 1984 covering the
investor-owned hospital companies. He spent the past 10 years in Detroit at
Automotive News, a sister Crain publication.
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