Spending on hospital care is rising and there's little hospitals can do about it, the American Hospital Association said about an AHA-commissioned study released last week.
The study blamed increased hospital-care spending on the rising costs of goods, the workforce shortage and greater demand for services.
The report said the spending accounted for 28%, or $148 billion, of the $528 billion increase in healthcare spending from 1998 to 2003. Overall spending on hospital care made up 32%, or $537 billion, of total healthcare spending in 2003, which reached $1.679 trillion.
Paul Ginsburg, president of the Center for Studying Health System Change, said the report is the AHA's way of saying, "Hey, it's not our fault, fellows."
Ginsburg agreed with the finding that salaries are a main driver in the increased spending and added that healthcare worker wages are increasing more than they are in other industries.
He cited a June Health Affairs study he helped write that showed hourly hospital wages rose 4.2% in 2003 and 4.8% in 2004, compared with 2.7% in 2003 and 2.1% in 2004 for all other industries.
The AHA study said that 52% of the rise in hospital spending can be attributed to higher costs for goods and services and three-quarters of that increase is fueled by rising wages.
The AHA said the study included administrative staff and caregiver pay, but Ginsburg said caregiver pay is more of a factor than executive compensation because there are far fewer executives.
However, Mary Kay Henry, executive vice president of the Service Employees International Union, disagreed and said she would have liked to have seen executive compensation broken out so it could be compared with caregivers. Henry said executive compensation has increased at a far greater rate than caregivers' wages.
"Most workers are seeing a 1% to 3% cost-of-living increase," she said.
Registered nurses are seeing increases of about 10% nationally, but their historically low salaries are the main reason for the shortage, Henry said.
The study was fashioned too narrowly and tried to validate hospital decisions, which don't address the broken healthcare system, she said. "I feel like the study tries to protect the status quo for hospitals," Henry added.
The study said that the higher demand for care drove 43% of the increase in healthcare spending. The increased demand was attributed to an aging population that has more chronic conditions because of factors such as the obesity epidemic.
The greater complexity of services that hospitals are offering explains another 5% of the hospital-care spending increase.
The study, prepared for the AHA by healthcare consultants the Lewin Group, covered contributing factors to hospital care's growing costs. Researchers analyzed existing data from various sources -- including the AHA, the Centers for Disease Control and Prevention, the CMS and the Labor Department -- and used the CMS' figure for overall healthcare spending.
Ginsburg said there is a greater demand for services -- partly because new services are available -- but he said the study may have overstated the importance of the aging population.
"It's not that large of a factor," he said.
The AHA is planning to produce this study annually and has conducted similar ones previously. A new trend that the study identified is the rise of inpatient admissions (See chart, p. 8).
"A surprising trend is inpatient admissions," said Carmela Coyle, senior vice president for policy for the AHA.
She later added inpatient admissions had leveled off in the late 1980s and early 1990s but "now what we are seeing is real growth."
Despite the greater admission totals and hospitals' increased spending on building, the construction for added services isn't meeting the demand, the study said (See related story, p. 8).
Kathleen Stoll, director of health policy for the healthcare consumer group Families USA, said that the study contains legitimate findings and the need for greater spending makes the proposed cuts to Medicaid puzzling. She added that higher healthcare spending is a reason for increased insurance premiums.