As a report released last week pointed a finger at hospitals as the leading driver of healthcare costs, health plans jumped on it as proof of their own earlier findings, while hospitals said their costs are still outpacing their revenue.
Last week's study by the Center for Studying Health System Change was the latest of several in recent months to look at the cost of healthcare in the country, and like several other reports, put the responsibility of spiking costs firmly on the shoulders of hospitals.
While the growth in spending on inpatient and outpatient hospital services slowed, hospital services still accounted for 51% of the overall growth in healthcare costs, which rose 9.6% in the privately insured market last year, down from 10% in 2001, according to the report.
The Chicago-based Blue Cross and Blue Shield Association quickly used the study to validate its own findings last fall that hospitals were the main culprit in a sharp upturn in healthcare inflation (Oct. 28, 2002, p. 6).
"We can save billions of dollars if hospitals, physicians and insurers work together to improve and make consistent the quality of care," Blues President and Chief Executive Officer Scott Serota said in a written statement.
In its report, the Blues blamed hospital consolidation and inappropriate use of medical technology as the main factors in spiking hospital costs.
In response, the hospital industry released two reports of its own saying increased patient volume and labor costs were driving up hospital costs and questioning the methodology behind the Blues report.
However, last week's study said the growth rate in use of inpatient and outpatient hospital services declined to 5.7% last year from 8% in 2001. Instead, it cited hospital prices as the main culprit in rising hospital costs. Hospital prices rose 5.1% in 2002, up from 3.6% the year before, the biggest one-year jump in a decade.
"Recent evidence from our site visits suggests hospitals continue to use their formidable negotiating leverage to seek large payment rate increases from health plans in part to reverse the effect of discounted hospital payment rates in the mid-1990s," said Bradley Strunk, co-author of last week's study.
The American Hospital Association, however, said reimbursements from health plans may be up but still fall short of rising expenses.
"We are hearing hospitals are not able to negotiate rates that keep up with costs," said Caroline Steinberg, vice president of health trends analysis for the AHA. In particular, she cited labor, prescription drug and malpractice insurance costs.
According to the report, hospital wages rose 5.5% last year, compared with 6.1% in 2001. Spending on prescription drugs by all consumers and providers rose 13.2%, the third year in a row that figure fell.
Overall, the 9.6% spike in healthcare spending represented the first time in five years the number had gone down. Still, it was nearly four times the 2.7% growth in the overall economy. The authors of the study attributed the growth slowdown to greater cost shifting that has resulted in less use of medical services by consumers.
The report also said that although overall healthcare spending growth declined, employer-based health insurance premiums rose 15% last year, the biggest jump in at least a decade.
"Insurance premium increases continue to outpace healthcare expenses with the profitability of insurers on the rise," Rick Pollack, executive vice president of the AHA, said in a written statement. "This demonstrates that hospitals are not the ones in the driver's seat."
Whether the rate deceleration will continue is debatable, the study's authors said. The Centers for Medicare and Medicaid Services recently predicted that private health spending would continue dropping for the rest of the decade, spurred by a slowdown in Medicare and private healthcare sector spending.
The CMS report stated healthcare spending is projected to rise 7.3% this year, down from 8.6% in 2002 and 8.7% in 2001.
Last week's study, though, said cuts in Medicaid and Medicare could lead to providers charging the private sector more to make up differences in reimbursements.