Prices across the healthcare sector rose 2.2 percent year-over-year in March 2018, the highest annual growth rate recorded by Altarum since January 2012, with the report warning rapid price growth is likely to continue.
In Alatraum’s latest report, the price growth was again driven by growth in hospital prices. Year-over-year growth was 3.7 percent, down slightly from February’s 3.8 percent, which had marked the highest growth rate since November 2009. Bucking the norms in price growth has been Medicare hospital prices outpacing the private sector (4.6 percent versus 3.7 percent year-over-year for March 2018) as Medicare hospital growth hit a nine-year high.
“As we note each month, health care inflation is low stage of the economic recovery, but is a sea change in the offing whereby the HCPI (healthcare price index) head towards 3 percent?” the March 2018 price growth report said.
Since the start of the recession in December 2007, healthcare prices have risen by 21.6 percent, above economy-wide price growth of 17.2 percent. The report said low inflation, policy uncertainty and “value-oriented health sector changes” put downward pressure on prices in mid-2017, but those factors have changed. Altraum said the growth trend seen in the Producer Price Index (PPI) “may be setting the stage for upstream pricing pressure.”
Despite “recent odd public price behavior,” the report said a gap remains between public and private payers when looking at cumulative increases. Since June 2014, when the federal Bureau of Labor Statistics began looking at private sector healthcare prices, Medicare hospital prices have risen by 3.9 percent, while private payer prices have jumped by 11.3 percent.
Rapid price growth wasn’t consistent across all categories. While dental services matched hospital care at 3.7 year-over-growth growth, prescription drugs were at 1.9 percent and durable medical equipment didn’t show any growth. Physician price growth doubled compared to the February report, but stayed at a low 0.6 percent.
Altarum’s healthcare spending report, which is a month behind its pricing brief, found year-over-year health spending growth increased from 4.5 percent in December 2017 to 4.9 percent in February 2018. The acceleration has been driven by an uptick in hospital spending growth, which has gone from a 28-year low in June 2017, hitting 4.3 percent in February 2018. It was partially offset by a decline in growth for physician and clinical services, which has fallen from 6.1 percent in July 2017 to 4.4 percent in February 2018.