Abstract
BackgroundUnited States health care spending rose rapidly in the 2000s, after a period of temporary slowdown in the 1990s. However, the description of the overall trend and the understanding of the underlying drivers of this trend are very limited. This study investigates how well historical hospital cost/revenue drivers explain the recent hospital spending trend in the 2000s, and how important each of these drivers is.MethodsWe used aggregated time series data to describe the trend in total hospital spending, price, and quantity between 2001 and 2009. We used the Oaxaca-Blinder method to investigate the relative importance of major hospital cost/spending drivers (derived from the literature) in explaining the change in hospital spending patterns between 2001 and 2007. We assembled data from Medicare Cost Reports, American Hospital Association annual surveys, Prospective Payment System (PPS) Impact Files, Medicare Provider Analysis and Review (MedPAR) Medicare claims data, InterStudy reports, National Health Expenditure data, and Area Resource Files.ResultsAggregated time series trends show that high hospital spending between 2001 and 2009 appears to be driven by higher payment per unit of hospital output, not by increased utilization. Results using the Oaxaca-Blinder regression decomposition method indicate that changes in historically important spending drivers explain a limited 30% of unit-payment growth, but a higher 60% of utilization growth. Hospital staffing and labor-related costs, casemix, and demographics are the most important drivers of higher hospital revenue, utilization, and unit-payment. Technology is associated with lower utilization, higher unit payment, and limited increases in total revenue. Market competition, primarily because of increased managed care concentration, moderates total revenue growth by driving lower unit payment.ConclusionsMuch of the rapidly rising hospital spending growth in the 2000s in the United States is driven by factors not commonly known or well measured. Future studies need to explore new factors and dynamics that drive longer-term hospital spending growth in recent years, particularly through the channel of higher prices.
Highlights
United States health care spending rose rapidly in the 2000s, after a period of temporary slowdown in the 1990s
positron emission tomography (PET) and percutaneous transluminal coronary angioplasty (PTCA) have expanded significantly: the number of hospitals owning PET increased by 35%, and the number of Medicare acute myocardial infarction (AMI) patients receiving PTCA rose by 27%
The insurance market structure has changed as well: total managed care penetration declined by 12%, while the market’s concentration increased by 11%
Summary
United States health care spending rose rapidly in the 2000s, after a period of temporary slowdown in the 1990s. Hay [5], using 1998–2001 data from a private health plan, showed that economic characteristics, technology, and hospital market structure are the most important factors explaining the (mostly between-state) variation in hospital cost. Another study covering the same period found that Health Maintenance Organization (HMO) penetration and caps on malpractice awards were the most important explanatory variables in hospital admissions/cost estimation [6]. A study from the Lewin Group [7], using data between 1998 and 2001 from three different sources, found that provider market structure and physician supply variables were most important in predicting hospital-based outpatient cost. Other studies analyzed hospital financial reports and provided descriptive evidence that rising costs for nurses and other personnel were one of the main causes of inpatient cost growth in the early 2000s [8,9,10]. Our research fills the gap in the literature by covering a longer period throughout the 2000s and using a more systematic approach to examine the underlying drivers of the spending pattern
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