CMS: Hospital, doc services demand slipped in 2016

Demand for hospital and physician services waned slightly in 2016 following intense demand in the prior year, according to a new government report released Wednesday.

Spending for hospital services hit $1.1 trillion, an increase of 4.7% in 2016. However, that was slower than the rate of 5.6% between 2014 and 2015. Spending on physician and clinical services grew 5.4% to hit $664.9 billion, which was down from a prior growth rate of 6.3%, according to the analysis by CMS Actuary Micah Hartman.

The slower growth in hospital and physician services is the result of decreased care needs. Rates spiked in 2015 because more people had health insurance thanks to Affordable Care Act coverage gains in the individual market and Medicaid. There was also an uptick in employer-sponsored coverage due to an improving economy.

Inpatient days and discharges both declined in 2016 by 0.3% and 0.6%, respectively, following two years of growth. These losses were offset by faster growth in hospital prices, which accelerated slightly from 0.9 % in 2015 to 1.2 % in 2016.

Both Medicare and Medicaid experienced slower growth in physician and clinical services spending in 2016, compared to 2015. Medicare spending on physician and clinical services, which constituted a 23% share in 2016, increased 3.8% after growing 4.7% in 2015. Medicaid spending on physician and clinical services saw a larger slowdown, increasing only 4.1% in 2016 after growing 9.9% in 2015 and 21.8% in 2014, due in part to slower enrollment growth.

Overall, Medicare expenditures hit $672.1 billion in 2016. The spending rate grew 3.6% in 2016, slowing from 4.8% in 2015, while enrollment growth remained relatively stable, increasing 2.8% in 2016 compared to 2.7 % in 2015.

Private health insurance spending on physician and clinical services, which represented a 43% share of all physician and clinical services spending, increased 5.8% in 2016, a slight uptick from 5.5% growth in 2015.

Study authors were unable to say during a media call Wednesday if HHS efforts to transform Medicare into a value-based program had any impact on the slowing growth rate. They did note that fee-for-service Medicare spending growth slowed slightly from 2.2% in 2015 to 1.8% in 2016.

Meanwhile, state and federal Medicaid spending collectively hit $565.5 billion in 2016, an increase of 3.9% over the prior years. That's a major drop from the 9.5% and 11.5% increases seen in the prior two years.

Finally, private insurance increased 5.1% in 2016 to reach $1.1 trillion, which was slower than growth was in 2014 and 2015, when private health insurance spending increased 5.7% and 6.9%, respectively, as enrollment grew by 8.7 million over the two years. The slowdown in private health insurance spending in 2016 was mainly driven by slower growth in enrollment.