Hospital spending growth falls to 28-year low

Between June 2016 and June 2017, hospital spending grew by 0.8 percent, according to revised economic indicators data posted by the Altarum Institute.

The 0.8 percent year-over-year growth is the lowest rate recorded by Altraum since it began its series in 1989. The revised data was included in the spending report for July 2017, saw slightly higher year-over-year growth of 1.1 percent. The report said the revised estimates reflected how the effects of expanded insurance coverage are leveling off, leading to lower growth in utilization of hospital services.

“We have seen private sector reports that indicated slowing hospital utilization, so have been puzzled that the data continued to show high hospital spending growth,” Paul Hughes-Cromwick, co-director of Altarum’s Center for Sustainable Health Spending, said in a statement. “This month, with these downwardly revised data, we are now seeing historically low hospital spending growth, and overall healthcare spending growth has dropped to the 4 percent range reminiscent of the historic slowdown prior to expanded coverage under the ACA.”

Health spending overall grew 3.9 percent year-over-year in June and 4.1 percent in July. In both cases, that growth was lower than the growth in gross domestic product (GDP), a measure health spending was usually outpaced in prior reports. The health spending share of GDP fell to 18 percent in July.

Hospitals continued to make up the greatest share (32 percent) of health spending in July, amounting to $1.10 trillion total. Other sectors are seeing greater growth, with home healthcare topping all other categories with 6.6 percent year-over-year growth—well above the 3.4 percent growth recorded in July 2016, when it was growing more slowly than the other major categories of healthcare spending.

Prices at hospitals grew by 1.5 percent in July, with slower price growth for Medicare patients (0.9 percent) and a decline for Medicaid patients (-0.1 percent). Commercial prices rose 2.4 percent year-over-year.

The slower growth in spending is expected to have a negative impact on hospital hiring. The report said jobs are already being added at about two-thirds the pace seen in 2015 and 2016, at a rate of about 6,000 jobs per month.

“With indications of declining hospital utilization and reports of potential job losses at individual hospitals, further declines in hospital job growth are expected in coming months,” the report said.