Hospital price growth remains in check, cherry-picked claims do not

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Hospital price growth remains in check, cherry-picked claims do not
tjordan_drupal
Sep 16, 2020

An all-too-common activity among some researchers is cherry picking data to support pre-conceived arguments. One of these false narratives is that hospitals and health systems are uniquely responsible for increased health care prices. But an examination of comprehensive data tell a different story.

According to the Centers for Medicare & Medicaid Services, price growth for hospital care services was just 2.4% in 2018, and non-price factors such as intensity of services and inpatient bed days grew slowly as well. These factors combined for historic low growth in hospital spending.[1] More recent data from the U.S. Bureau of Labor Statistics shows hospital prices have consistently grown less than 3% per year over the last decade and have frequently grown by less than the average rate of inflation. In fact, even when excluding the artificially low rates paid to hospitals by Medicare and Medicaid, annual price growth has still been below 3% in recent years.[2]

Some researchers may erroneously suggest that Medicare payment rates are the gold standard by which privately negotiated rates should be compared. Yet this flies in the face of the widely accepted fact that Medicare reimburses well below the cost of providing care. In 2018, hospitals were paid only 87 cents for every dollar they spent caring for Medicare patients. The total Medicare payment shortfall was $57 billion in 2018, up from $37 billion in 2014.[3] If private payers were to adopt Medicare payment rates, it would strip vital health care resources from already strapped communities. Hospitals would not have the resources needed to keep their doors open, invest in new technologies that improve care delivery and quality, innovate and transform, and maintain the services communities need and expect.

Even before the current COVID-19 crisis, the financial health of many hospitals and health systems was challenged, with a third operating in the red and increasing numbers of uninsured patients. The COVID-19 pandemic now presents the greatest financial threat in history for hospitals and health systems.[4] Many struggle to maintain cash flow and keep their doors open.

Any suggestion that more resources should get pulled from hospitals and health systems right now – during a global pandemic – is beyond reckless. Doing so would endanger patients and threaten access to care for communities across America.

Aaron Wesolowski is AHA vice president of Policy Research, Analytics and Strategy.

 


[1] National Health Expenditure Data, 2018. CMS, Office of the Actuary, National Health Statistics Group. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html

[2] Bureau of Labor Statistics, Producer Price Index Data, Series PCU622 and PCU 62211A. https://www.bls.gov/ppi/

[3] American Hospital Association, January 2020 Fact Sheet: Underpayment by Medicare and Medicaid. https://www.aha.org/system/files/media/file/2020/01/2020-Medicare-Medicaid-Underpayment-Fact-Sheet.pdf

[4] https://www.aha.org/press-releases/2020-07-21-new-analysis-shows-dramatic-impact-covid-19-hospital-health-system

Aaron Wesolowski
Blog

Hospital price growth remains in check, cherry-picked claims do not
tjordan_drupal
Sep 16, 2020

An all-too-common activity among some researchers is cherry picking data to support pre-conceived arguments. One of these false narratives is that hospitals and health systems are uniquely responsible for increased health care prices. But an examination of comprehensive data tell a different story.

According to the Centers for Medicare & Medicaid Services, price growth for hospital care services was just 2.4% in 2018, and non-price factors such as intensity of services and inpatient bed days grew slowly as well. These factors combined for historic low growth in hospital spending.[1] More recent data from the U.S. Bureau of Labor Statistics shows hospital prices have consistently grown less than 3% per year over the last decade and have frequently grown by less than the average rate of inflation. In fact, even when excluding the artificially low rates paid to hospitals by Medicare and Medicaid, annual price growth has still been below 3% in recent years.[2]

Some researchers may erroneously suggest that Medicare payment rates are the gold standard by which privately negotiated rates should be compared. Yet this flies in the face of the widely accepted fact that Medicare reimburses well below the cost of providing care. In 2018, hospitals were paid only 87 cents for every dollar they spent caring for Medicare patients. The total Medicare payment shortfall was $57 billion in 2018, up from $37 billion in 2014.[3] If private payers were to adopt Medicare payment rates, it would strip vital health care resources from already strapped communities. Hospitals would not have the resources needed to keep their doors open, invest in new technologies that improve care delivery and quality, innovate and transform, and maintain the services communities need and expect.

Even before the current COVID-19 crisis, the financial health of many hospitals and health systems was challenged, with a third operating in the red and increasing numbers of uninsured patients. The COVID-19 pandemic now presents the greatest financial threat in history for hospitals and health systems.[4] Many struggle to maintain cash flow and keep their doors open.

Any suggestion that more resources should get pulled from hospitals and health systems right now – during a global pandemic – is beyond reckless. Doing so would endanger patients and threaten access to care for communities across America.

Aaron Wesolowski is AHA vice president of Policy Research, Analytics and Strategy.

 

[1] National Health Expenditure Data, 2018. CMS, Office of the Actuary, National Health Statistics Group. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html

[2] Bureau of Labor Statistics, Producer Price Index Data, Series PCU622 and PCU 62211A. https://www.bls.gov/ppi/

[3] American Hospital Association, January 2020 Fact Sheet: Underpayment by Medicare and Medicaid. https://www.aha.org/system/files/media/file/2020/01/2020-Medicare-Medicaid-Underpayment-Fact-Sheet.pdf

[4] https://www.aha.org/press-releases/2020-07-21-new-analysis-shows-dramatic-impact-covid-19-hospital-health-system

Aaron Wesolowski

Medicare
Finance & Budgeting

Blog

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