Hospital Prices Spike in February

Prescription drug price increases appear to be the biggest driver of healthcare spending, while spending for physician and hospital services decelerated.

Hospital prices grew 3.8% last month, when compared with February 2017, the highest growth rate in more than a decade, according to Altarum's Health Sector Economic Indicators.

"We are puzzling over this significant jump in hospital prices in recent months based upon the hospital produce price indexes from Bureau of Labor Statistics,” said healthcare economist Charles Roehig, with Ann Arbor, MI-based Altarum .

"Hospital prices averaged 1.6% growth in 2017, increasing to 3.5% during the first 2 months of 2018. Further, growth has accelerated for each of the three main payers: Medicare, Medicaid, and private health plans," he said.

For all of 2017, national health spending grew by 4.6% from its 2016 level.

"Year-over-year spending growth has remained close to this moderate but still not sustainable rate in each month since July 2017," Altarum said in its analysis. "We see 22 consecutive months where the healthcare spending share of GDP has not fallen below 17.9% nor risen above 18.1% including the most recent 3 months of the share being 18.0%."

The primary driver for the uptick in healthcare prices is prescription drug spending, which grew 1.3 % in 2016 but rebounded to an estimated 5% in 2017.

However, the 5% growth estimate does not account for possible changes in prescription drug rebates, Roehrig said, which could lead to a significant downward revision in the growth rate when the Centers for Medicare & Medicaid Services releases 2017 estimates in December.

The cost of physician and hospital services slowed from 4.8% to 4.4% within that timeframe.

Other findings:

• At $3.58 trillion, national health spending in January 2018 was 4.8% higher than it was in January 2017. Year-over-year spending increased in all major categories, with home healthcare growing the fastest, at 7.7%, and dental services the slowest, at 3.2%.
   
• Healthcare added 18,500 new jobs in February 2018, fewer than the 12-month average of 24,000 new jobs per month. Half the health sector job growth was in hospitals, which added 9,300 jobs, above the 12-month average of 7,200. Job growth in ambulatory settings was lower than usual at 8,100 new jobs, about half the 12-month average of 15,500.