Abstract
Objectives: To investigate components of the rapidly increasing trend in hospital spending in the 2000’s and their relationship to market structure. Study Design: Aggregate time series and multivariate analysis are conducted to test whether hospital spending growth is driven by price or quantity and how recent hospital spending growth is related to health plan and hospital market structure. Method: Hospitals are grouped into strong and weak competitive markets based on the relative concentration of hospital and health plan markets as well as managed care penetration. Results: Inflation adjusted hospital spending grew much faster than gross domestic product (GDP) throughout the 2000s. Regression results show that rapid growth was observed across all hospital markets—even in those markets where price competitive market forces are the strongest and that rising hospital prices, and not utilization explain most of the increases in hospital spending. Conclusions: Hospital spending exceeded the consumer price index (CPI) by a substantial margin in the 2000’s due in part to weakening competitive market forces, which had a dampening effect on spending and especially prices. Unless competition is restored, the cost of health care for consumers, employers and public payers can be expected to increase.
Highlights
Recent health reform legislation includes mandates and government subsidies to extend health insurance coverage but relies on existing regulatory and marketbased approaches to control future health care spending
We use data for 2001 through 2007 to conduct multivariate regression analysis to decompose per capita hospital spending growth into quantity and price trends and assess how these two components have grown over time as a function of three inter-related hospital market structure dimensions: managed care (MC) penetration, MC plan concentration, and hospital market competition
With the reported weakening of managed care we expected a surge in hospital utilization, which would explain much of the increase in per capita hospital spending
Summary
Recent health reform legislation includes mandates and government subsidies to extend health insurance coverage but relies on existing regulatory and marketbased approaches to control future health care spending. We use data from all acute care hospitals in the US for the period 2001 through 2009 to document hospital spending patterns under existing and evolving market conditions as a guide to what we might expect in the future as health reform is implemented over time, in light of the emerging trend of physicianhospital consolidation into integrated systems or accountable care organizations. We use data for 2001 through 2007 to conduct multivariate regression analysis to decompose per capita hospital spending growth into quantity and price trends and assess how these two components have grown over time as a function of three inter-related hospital market structure dimensions: managed care (MC) penetration, MC plan concentration, and hospital market competition
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