Price increases ease
Medicare curbs slow some growth; Medicaid ticks up
Acute-care hospital prices cooled last year as prices paid by commercial payers and Medicare slowed. The slowdown in hospital prices, captured by the Bureau of Labor Statistics, comes as Medicare seeks to curb spending and hospitals report smaller increases from commercial health plans.
Hospital prices climbed 2.1% last year after an increase of 2.9% the year before, according to the broader of two measures the labor bureau uses to measure inflation, known as the Producer Price Index. The producer index and its cousin, the Consumer Price Index, provide snapshots of how hospital prices for households, insurers, Medicare and Medicaid change from one year to the next. Medicare prices grew 1.4% last year, preliminary producer price figures show, compared with 2.8% the prior year.
Notably, Medicaid prices rebounded last year after seeing their first decline in a dozen years in 2010. Medicaid prices increased 1.2% last year after the 0.4% drop the year before. Paul Ginsburg, an economist who is president of the nonpartisan Center for Studying Health System Change, said the reversal could suggest that state pressure to squeeze hospital Medicaid rates may have eased. Meanwhile, commercial health plan prices climbed 3.2%, down from 4.7% in 2010.
Rating analysts with Moody’s Investors Service have reported lower hospital rate increases from commercial insurers, a trend that is likely to continue. “We expect commercial payers to remain highly aggressive in negotiat- Growth in hospital prices paid by Medicare and commerical health plans ebbed last year ing lower reimbursement rates with hospitals in 2012,” the rating agency said in its January outlook for the not-for-profit hospital sector.
Standard & Poor’s analysts said in January that smaller rate increases from commercial insurers were “an important contributor” to a weakening revenue outlook for the sector.
Ginsburg said growth in so-called narrow network health plans, which limit patient choice to certain providers, could also wring rate concessions from hospitals that seek to join the network.
The second inflation measure is a narrower alternative that more closely tracks out-of-pocket spending by consumers. The agency’s Consumer Price Index seeks to measure the prices paid by households by tracking deductibles and other out-of-pocket spending and insurers’ share of payments for plans that include costsharing by patients. The consumer index does not reflect Medicaid or Medicare, except Part B.
The hospital Consumer Price Index grew more rapidly last year, by 6.2%, but also slowed from the prior year’s increase of 7.8%. Consumer prices for patients admitted to the hospital drove growth in overall consumer hospital prices. Inpatient hospital prices climbed 6.8% last year as outpatient prices grew more slowly at 5.1%. Consumer prices for the economy as a whole climbed 3.2% last year, the bureau’s data show.
Overall spending on hospitals is affected by the volume of hospital care and the price of that care. In recent years, overall spending has been driven by changes in demand, not price.
An analysis by federal health officials shows that growth in demand for hospital services— how often people sought hospital care and the intensity of care they received—fluctuated between 2008 and 2010, the most recent data available from the CMS.
Meanwhile, growth in prices and population largely held steady. The CMS tracks prices using the Producer Price Index for all hospitals, including acute-care hospitals, said Aaron Catlin, deputy director of the CMS’ National Health Statistics Group.
Hospital spending growth declined in 2010 to 4.9% from 6.4% the prior year as the growth in demand for hospital services fell to 1.1% in 2010 from the previous year’s 2.6%. Price growth hovered at 3% both years.