- A new Robert Wood Johnson Foundation blog post questions whether healthcare spending growth will return to pre-Affordable Care Act (ACA) levels.
- Katherine Hempstead, who leads the foundation’s health insurance coverage, pointed to a recent Altarum Institute healthcare spending trend report that showed spending growth reached 4% in the second quarter of 2017, which was the lowest quarterly increase since 2014.
- She said recent spending growth has been powered by ambulatory care utilization, which has also had an effect on job growth.
Altarum’s Center for Sustainable Health Spending’s Health Sector Economic Indicators released last month said a major reason for the growth slowdown in the second quarter was hospital spending, which grew just 1.3% rather than the expected 4% growth rate. Year-over-year hospital spending only increased by 1.1% in July. June saw the slowest growth rate year-over-year (0.8%) since January 1989.
Payer efforts to reduce hospital spending seem to be working. Insurers continue to look for more ways to reduce hospital utilization. Anthem said recently it will no longer pay for MRIs and CT scans at hospitals in 13 states unless the tests are an emergency, and that it would no longer cover “unnecessary” emergency department visits. The CMS is also proposing to make costs more site neutral by paying services at off-campus hospital outpatient departments at 25% of regular outpatients rates. The same proposal also includes a small increase (1.75%) for outpatient payments.
All of these efforts look to reduce hospital spending growth and utilization further and move that business to outpatient services, which are less expensive. This spending growth slowdown and move to outpatient services are affecting hospitals, which have responded through M&A activity and by cutting services, outsourcing and laying off staff.
In her blog post, Hempstead said ambulatory care has seen both utilization and job growth, as payers push patients to outpatient care rather than hospitals. “It remains to be seen whether there will need to be some recalibration on the ambulatory side as growth in demand levels off, financial pressures potentially intensify, and the delivery system continues to evolve,” she wrote.
Healthcare spending peaked in Q1 2015, as more Americans with insurance increased utilization of services, prescription drug use and the net cost of insurance, wrote Hempstead. However, that spending leveled off last year and continues to slow this year. She questioned whether we will soon return to pre-ACA spending growth levels.
In addition to ambulatory care, Hempstead said urgent care is a sector to watch. There are more than 7,500 urgent care centers and the sector has grown into a $25 billion industry. Plus, providers such as HCA Healthcare, Community Health Systems and Tenet Healthcare are all investing in urgent care centers and freestanding emergency departments.
However, Hempstead raises the questions: Has the urgent care industry grown too quickly? And is telemedicine a less costly and better alternative?