A new study blaming hospital spending for rising healthcare costs put the industry on the defensive last week, at a time when it is trying to win support for more disaster preparedness funding for hospitals.
Hospital services, not prescription drugs, accounted for the largest share of a 7.2% jump in per-capita healthcare spending last year, according to a new study by the Center for Studying Health System Change, Washington.
The increase in spending per privately insured person was the largest year-to-year growth in a decade, although only marginally greater than in 1999, when overall healthcare costs grew 7.1%. Hospital services-both inpatient and outpatient-accounted for 47% of the growth last year, the center said in its study released last week.
"Hospital care has resumed its former place as the major driver of healthcare costs," said Paul Ginsburg, president of the nonpartisan policy research group and co-author of the study.
The study's release came at a time when much of the healthcare industry has homed in on disaster readiness as the topic of the day. In fact, the American Hospital Association, originally scheduled to participate in a panel at the press conference announcing the study's results, backed out of its appearance for just that reason.
"Our sole focus right now is on the tragedy of Sept. 11," said Carmela Coyle, senior vice president for policy at the AHA. "Very seriously, we are focused like a laser beam on America's hospitals being prepared on disaster readiness."
She said, however, that the study showed hospital costs are rising, a shift from the past several years. The increasing use and cost of pharmaceuticals coupled with staff shortages are driving that trend, she said.
The study's results showed rising medical costs fueled an average 11% premium increase for employer-sponsored health coverage this year. The combination of cost and premium inflation during a period of economic decline most likely means consumers will pick up a greater portion of the tab for healthcare services and the number of uninsured will grow, the authors said.
Consumer demand for broad networks of hospitals combined with hospital mergers and consolidations have given some hospitals greater clout in their negotiations with insurers, which are now trying to restore their profit margins by increasing premiums, a trend that could worsen in 2002, Ginsburg said.
He attributed the jump in hospital spending to rising labor costs and a retreat from tightly managed care that has increased demand for services.
Spending on hospital-based outpatient services recorded its biggest increase since 1992-an 11.2% jump in 2000 compared with an 8.9% increase in 1999. Inpatient spending increased 2.8% in 2000.
Meanwhile, growth in prescription-drug spending, at 14.5%, outpaced overall healthcare spending growth but was significantly lower than the 18.4% increase in 1999. Prescription drugs were responsible for 27% of the overall increase in healthcare spending in 2000, compared with 41% in 1999-a decline attributed to a lack of new blockbuster drugs and a shift to multitiered pharmacy benefits.
So far, it appears spending is continuing to grow in 2001 for inpatient and outpatient hospital care, as well as for prescription drugs, Ginsburg said.
"I think this is probably going to pervade policy discussions," Ginsburg said. "Costs, which were a huge issue in the 1980s and 1970s but not in the 1990s, are re-emerging."
Not all hospital groups shared the AHA's reluctance to shift focus away from disaster preparedness. The Federation of American Hospitals, which represents about 1,700 for-profit hospitals, used the report to bolster its claim that nursing and other staff shortages have driven up hospitals' labor costs.
"The (center's) study reflects the `real world' experiences of America's hospitals," Federation President Charles "Chip" Kahn said in a written statement. "We hope that this additional empirical evidence, combined with the softening economy and the graying of the baby boom generation, will help foster the health policy debate during the remainder of the current congressional session."