Weak consumer hospital spending drags down GDP

The economy grew more slowly than previously believed in the third quarter and one reason was weaker-than-expected consumer spending at not-for-profit hospitals.

The Bureau of Economic Analysis yesterday said the nation's gross domestic product grew an estimated 1.8% in the months of July, August and September, down from the prior 2% estimate.

Consumer spending overall—and notably spending on tax-exempt hospitals—proved more sluggish than previously thought after economists incorporated newly available data. For consumer spending, “the largest contributor to the revision was healthcare—mainly nonprofit hospital services,” the agency said in a technical note explaining the change.

Hospitals have widely reported a slowdown in revenue growth since the recession, which healthcare executives blame on more uninsured, fewer patients with better-paying commercial insurance, and patients who have delayed seeking medical care. Hospital officials also expect revenue growth to continue at its more anemic pace as government payers squeeze reimbursement in an effort to slow health spending.

However, quarterly data the Census Bureau provided to the Bureau of Economic Analysis for consumer not-for-profit hospital spending also includes investment revenue. Volatile markets ended the third quarter on Sept. 30 down sharply from the June 30 close of the second quarter. Hospitals' unaudited financial statements underscored the sharp drop with declines.

Kyle Brown, an economist with the BEA, said the agency did try to adjust data for reported investment losses using its best estimate. Brown said his agency contacted the U.S. Census Bureau after a review of consumer spending revealed weak not-for-profit hospital growth and Census officials reported hospital investment losses, but could not provide specific figures to more closely adjust consumer spending figures.

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