June spending on hospital care rises at slowest rate in 28 years

By: Dave Barkholz

National spending for hospital care decelerated to near stall speed in June, registering the smallest year-over-year increase in 28 years, an Altarum Institute analysis has found.


The revised June increase of just 0.8% is being driven by consumers and payers seeking outpatient settings for more procedures, said Paul Hughes-Cromwick, co-director of Altarum’s Center for Sustainable Health Spending in Ann Arbor, Mich.

Hospitals also are elevating quality to reduce readmissions and hospital-acquired infections, among other reasons for the decline, Hughes-Cromwick said.

“We hope these (quality) measures are taking effect,” he said.

Revised government data brought the hospital spending increase in June down from 1.3% originally to 0.8%, the Altarum analysis shows. Hospital spending rose 1.1% year-over-year in July, the third straight month with a very tame increase, Hughes-Cromwick said.

The June increase was the smallest year-over-year boost in hospital care spending since Altarum began keeping records in 1989.

Hospital spending has also been hampered by flattening volumes from the newly insured under the Affordable Care Act as well as consumers with high-deductible plans putting off elective procedures—a trend seen by the investor-owned hospital companies in the second quarter.

Depressed hospital spending allowed overall health spending to slow to 4.1% in July year-over-year, which was slightly below the 4.2% growth in the nominal gross domestic product in July, Altarum found.

The 1.1% increase in hospital spending in July was the slowest among all healthcare sectors, while home healthcare rose the fastest at 6.6%.

A new study by consultancy KPMG confirms that admissions are slowing among chronically ill Medicare beneficiaries.

By analyzing Medicare data, KPMG found that hospital admission rates dropped 9% between 2012 and 2015 for Medicare beneficiaries with three or more chronic conditions.

That’s an indicator that efforts to improve coordination of care is starting to pay off, the study noted.

“We are learning that coordination of care is key to reducing unnecessary admissions and readmissions,” said Dr. Cynthia Ambres, principal at KPMG Strategy.

Healthcare prices also remained tame in July, rising 1.5% year-over-year, the same as in June, Altarum found.

Hughes-Cromwick said private insurers are starting to follow the lead of Medicare and Medicaid by ratcheting down on prices.