fah hospital policy blog

Perspectives on health policy affecting America’s hospitals and the patients we serve.

New Study on Hospital Prices Uses Limited Data to Draw Flawed Conclusions

February 05, 2019 | FAH Policy Blog Team

Category: FAH News, Financing

FACT: Hospital Price Growth Across All Payers Averages Just 1.8% Over Last Three Years

A study published by Health Affairs on Monday evening uses limited, old data to draw flawed conclusions about hospital prices.

The groups of six researchers based their study on the Health Care Cost Institute's (HCCI) limited claims data for people with employer-sponsored insurance from Aetna, Humana and United Healthcare Group (which recently announced it was dropping out of HCCI). It is noteworthy that this data base is not comprehensive – covering only 27.6% of individuals who have employer-sponsored coverage.

The researchers also focused on data going back 12 years - from 2007 to 2014 - completely ignoring recent trends of slowing hospital price and spending growth.

The January 2019 report from the Altarum Center for Value in Health Care shows that hospital price growth across all payers averaged just 1.8 percent over the last three years (2016 through 2018). Altarum also found that hospital year over year spending growth through November 2018 was lower than all other categories of services, including physician and clinical services and prescription drugs.

In comparing differential price growth between hospitals and physicians, the researchers also didn’t take into account the significant costs borne by hospitals that do not apply to physicians.

According to data from the American Hospital Association, it is estimated that nationally hospitals, health systems and post-acute providers spend nearly $39 billion annually on the administrative aspects of regulatory compliance. And an average-sized community hospital spends $7.6 million per year, or $1,200 per admission, to support compliance with regulations from just four federal agencies.

The report in Health Affairs also ignores other consequential costs that hospitals bear in order to provide lifesaving care to anyone who comes through their doors 24/7 – costs like purchasing drugs and medical devices.

A recent study conducted for FAH and AHA found that the average total drug spending by hospitals per admission increased 18.5% between fiscal years 2015 and 2017 – the main driver was price increases from pharmaceutical companies.

It is estimated that during the period that the researchers studied, 2007 to 2014, hospitals invested more than $300 billion in health information technology operating and capital expenses.

Clearly these researchers were looking in the rearview mirror and didn’t dig deep enough into current data and trends - while ignoring cost pressures hospitals face providing care for the patients and communities they serve. We hope this isn’t overlooked in the future.