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Higher Prices By Hospitals, Other Providers, Drove 2011 Spending Increases, Study Finds

By Julie Appleby

September 25th, 2012, 5:58 AM

Source: Health Care Cost Institute

Spending on medical care for Americans with job-based insurance rose 4.6 percent last year, driven mainly by higher prices charged by hospitals and other medical providers, a report out today says.

The growth came despite a sluggish economy which some economists thought would translate into more modest spending growth. Still, last year’s per enrollee increase ranks below the 5.8 percent increase in 2009, according to the Health Care Cost Institute, a nonpartisan research group funded by insurers.

It isn’t clear from the data whether last year’s uptick represents a return toward  the higher averages of the past – or whether it was an anomaly within a general slowdown, said David Newman, executive director of the institute.  The institute noted the 2010 slowdown in its first report, which documented a 3.8 percent spending increase for privately insured Americans that year.

The current report found that employers in the Northeast spent the most on health care last year, at $4,659 per enrollee, while those in the West had the lowest tab at $4,358.

The data are based on 6 billion actual claims paid by insurers covering about 40 million people, representing one of the broadest looks at spending by employers for medical services.  The data do not include spending for people covered by Medicare, Medicaid, or for those who buy their own coverage.

The data – available for free to researchers, employers and consumers – can help those who negotiate for health coverage “to ask what justifies price increases that are two and three times inflation,” says Newman.

While the Consumer Price Index rose 3.2 percent between 2010 and 2011, for example, the average price for inpatient hospital care rose 5.3 percent. That increase occurred as admissions declined half a percentage point, the study found.

Reports by other organizations released this year showed that the overall slowdown in medical spending seen in the past few years has had an impact on insurance costs. Premiums rose for employers at moderate rates by historical standards, according to a report out earlier this month by the Kaiser Family Foundation. That report found that premiums rose, on average, 4 percent for family coverage in 2012, well below last year’s increase and half the 8 percent average of the previous decade. (KHN is an editorially independent program of the foundation.)

18 Responses to “Higher Prices By Hospitals, Other Providers, Drove 2011 Spending Increases, Study Finds”

  1. larry patterson says:

    Need anymore be said? The entire industry is corrupt. Providers can not be trusted. They need constant review. Given the choice, providers will always gouge the consumer. Pharma is the worst actor. Pharma needs constant regulation and restraint. Congress needs to seriously crack down on pharma. They can begin with Medicare Part D. The government needs to begin to negotiate for the lowest possible price for all medicines and medical devices for our seniors. It time to stop paying what pharma dictates for Medicare Part D meds and medical devices.

  2. Will Nicholson M.D. says:

    I am a family physician who works at community hospital in Minnesota. My hospital-based income did not grow at two times inflation. I’m not sure where that money for hospitals and other providers is going, but I’d love to see a bigger emphasis on preventing illness in the first place. As it is today, our “sick care” system will never be as cost-effective – or as ethical – as a system that actually cares for health.

  3. RoMd. says:

    Total lie, the government “LIES” as a primary care doctor my cost is going up constantly and the insurance industry (medicare included) has not increased reimbursement, they have actually cut our returns and dumped more of their administrative leg work unto doctors.

    The odasity of this administration to set the stage to cut doctors out of reimbursement. This
    attitude will result the insurance industry racquet (including medicare) in the same situation as medicaid in which doctors will not accept.

    The reports are LIES.

  4. paul kennedy says:

    Uh, if life is so darn hard as a solo primary care doc, why don’t you do like my PCP is doing. He is in the process of selling his practice to a newly forming ACO group of ten regional hospitals. He’ll become a salaried employee in the group and he’ll probably see most of his former patients. He’ll have regularly scheduled hours, he’ll have a healthcare plan and a dental plan for himself and his family, he’ll have a pension plan, he’ll have access to a 401k plan with a generous matching percentage, he’ll have paid holidays and paid vacations and best of all, no more hassles of paying the rent, paying a staff, maintaining an office with phones and computers and fax machines and heat bills and air conditioning bills and fixing the roof and the plumbing and on and on and on. With all of that, I don’t blame him for selling out!

  5. oncdoc says:

    Paul Kennedy, Drs will avoid selling out if they can because working for “a 10 hospital ACO” sounds like it either is of will soon become a low paying lousy job. Yea!, I would love to see that “paid vacation schedule” I’m sure it’s great. Employed physicians are becoming increasingly unhappy and there have been a few recent studies linking physician employment to higher costs. That probably is a big part of the increase in OP spending above.
    People need to quit blaming Drs for the cost problem; since 70% are employed, you should blame their employer

  6. Eileen Smith says:

    These numbers are always confusing. The data doesn’t tell a story about RATES paid to providers. The story is about spending for people with employer-sponsored coverage. A hospital system CEO in Minnesota told me that for every $1 they spend to care for patients covered by Medicare and Medicaid they receive about 75 to 80 cents. Those losses are made up on care provided to people with employer-sponsored coverage where they receive about $1.20 for every $1 they spend to care for the patients. Fortunately for this system, many patients have employer-sponsored coverage. The cost shift is growing, so spending in the employer-sponsored side are increasing. Unfortunately, there aren’t easy answers as governement spending continues to be a concern, we’re getting older and are in need of more and more health care services.

  7. Rita h. says:

    ONCDOC apparently does not see the handwriting on the wall. The sad fact is, for decades providers have had a pretty nice ride. Virtually no accountability and a fee-for-service system that has no incentive to be thrifty. Consumers? Who the hell cares about them? Here’s a suggestion doc. There’s a huge tsunami coming. Something like you’ve never seen in your entire career. The smart docs see it. The docs in denial won’t see it until it’s too late and they see nobody sitting in their waiting rooms.

  8. RoMd says:

    Mr. Paul Kennedy,

    The ACO carry many conditions of which may be difficult to meet unless you work for or with a larger organization such as a hospital.
    The hospitals are going to get paid for everything your insurance does not cover. If medicare does not cover repeat hospital admission for pneumonia within a 30 day period starting 6 days from now, guess who will pay for the 401 k, paid vacations, no more hassles, bills to fix roof and clinic upkeep ? The patient pays. The government is going to cut reimbursement to doctors within next 5-10 years, mainly specialist.
    As a primary care doctor I can tell you sincerely that if I did not have to deal with the insurance/medicare racquet, billing which is no different than an electronic mail order rebate system with up to one year on returns, paying a employee to fight for rejected
    visits, and all to conceive the idea that our country is getting FATTER and really doesn’t care about healthcare but the cost. It is a real turn off for any primary care doctor especially if you are a geriatrician like myself. I think I will just wait a bit until hospitals get cut and specialist and then dump medicare and all the other racquet oriented parasites from my clinic and go cash only or boutique style medicine which is what our government does not want because more individuals will result in the ER for the care.

  9. oncdoc says:

    Ritah, Let me tell you about my “nice ride” and I dont know why the fact that some of us may have done well financially is sad!
    6 yrs post grad training , residency every 4th call and fellowship every weeknight and 4th weekend call as well as ongoing endless 1 hr presentations
    since starting practice 3 6:30AM hospital conferences a week
    every 4th call as well as continuous ER and Consult call with an ever expanding uninsured population
    5d a week office and hospital rounds every day
    no compensation for unassigned or indigent pts and our center finds a way to get most treated
    dictate charts on sat
    2 bros in law and my brother(all not in Medicine) make more and work less than I
    Not complaining but I’m not sorry that I have made a decent living. I have friends who are employed and IMO too many are unhappy. Thankfully I have my kids education almost taken care of and therefore will have less financial pressure in coming yrs. I think I would open a bar before I worked for a hospital

  10. rick laramore says:

    The hospital lobby was in the room when the Affordable Care Act (ACA) was created! Get it? All the industry players had their say in that room before Congress in Washington DC. The hospital lobby signed off on the deal because they saw more patients coming through the door in the future and virtually all of those patients would be mandated to carry comprehensive insurance coverage as mandated in the ACA. Now they are crying! The ACA is still in the process of slowly rolling out and the whining hospitals are getting impatient. Hospitals need to stop whining and be patient, like the rest of us, as the ACA rolls out. Remember, your buddies in the Republicans party? The ultra right-wing Heritage Foundation? Well the Heritage Foundation originally dreamed up the ACA back in 1989. Mitt Romney liked the idea so much, he enacted it as Governor of Massachusetts. In Massachusetts, Romneycare works and hospitals love it! Virtually everyone in Massachusetts pays for their health insurance. It’s health care nirvana up there compared to the rest of America. Now, for some strange reason, the Heritage Foundation and Mitt Romney and every other Republican on the face of the earth hate the ACA and want it repealed. My opinion, it’s about a black man embracing a white man’s idea and the white man isn’t getting the credit. These hypocrites in Congress want to see Obamacare repealed as soon as possible because a black man likes it. So, the ACA has a uphill climb because we have a bunch of civil war racists in Congress. If hospitals want to cry and whine, maybe they should cry and whine about the real threat to the deal they made in Washington DC. Repealing Obamacare will put you back in the dark ages and that’s exactly what Republicans really want.

  11. rick laramore says:

    By the way ONCDOC, would you like me to show you the world’s smallest violin?

  12. 150 claims per person? says:

    “6 billion actual claims” for “40 million people”. I see the doctor once or twice per year.

    Is the calculation of 150 average claims per person valid?

  13. Tom kingmans says:

    From the above posts, does anyone question the desperation that is quite apparent in those who make a living in the healthcare profession? They are in complete denial and are hanging on for dear life in hopes that there will be some sort of massive win by the Tea Party so that we will see the repeal the Affordable Care Act. Do these docs really want to return total control of our broken fee-for-service healthcare system to the insurance companies? It wasn’t long ago that these same docs were crying the blues about how they were being pushed around by the private insurance companies. Now that Obamacare has taken away some of that insurance company control, do these doctors really want to go backwards and return to that kind of treatment again? Geez! These docs make Mitt Romney’s flip-flopping look elementary.

  14. WellRead29 says:

    I am frankly rather surprised,that this article made it through a discussion of how UNIT COSTS paid by privately insured folks went higher and nothing in the “reasons” column even mentioned the declining payments made by the U.S. and State governments to hospitals and docs on behalf of the patients they are charged with insuring, specifically Medicaid and Medicare.

    Average hospital today has 2/3rds of their beds occupied by a government-insured patient. Average margin on those patients vary widely, but the overall is NEGATIVE margin and shrinking. Medicaid especially in this time of tight state budgets has been balancing its budget on the backs of docs, hospitals, and home health agencies.

    But no, we can’t go blaming the government or mention the expansive cost-shifting driven by government underpayments. Let’s not go there.

    Poorly done.

    WR29

  15. terry otto says:

    If hospitals want to complain, they should call the respective governors of the state in which they are located. With the Tea Party tsunami of November 2010, a host of new Tea Party governors were elected and those governors hate President Obama and all that he stands for. So, these governors naturally are being forced by the Tea Party that elected them to not opt for the federally funded Medicaid expansion. The Medicaid expansion would be a huge help to hospitals and hospital administrators were fully expecting the funding that the expansion would bring. Hospitals were betting that no governor in their right mind would turn down a 100 percent federally funded program strictly on ideological principles. I guess hospitals didn’t really understand how insane the Tea Party really was, did they. Nobody expected a “Thelma & Louise” style political party like the Tea Party to ever emerge, but they did and they elected some really insane people to become state governors. For a governor to turn down the Medicaid expansion is to guarantee that the hospitals in your state will, without any doubt, fail!

  16. oncdoc says:

    PPACA Could Directly Eliminate 400K Hospital Jobs in 2013 “ultimately to the detriment of Medicare benificiaries” (from Beckers Hosp Review today)
    This is the result of the $700+B diverted from Medicare because of Obamacare
    The Quality of care in a typical American Hospital for Medicare pts is IMO falling fast and if nothing is done will become unbearable for Drs and pts. Those who can will begin to flee to emerging non-govt hospitals and clinics where the care is better and the cost lower. The reducedi cost shifting will hasten the decompensation of the govt Hospitals. I am not in denial about anything; pts are beating down my door and will continue to need services no matter what ! I dont want to abandon govt funded pts but if a non-govt option comes available it will be a tough choice
    All you Obamacare supporters can go back to drinking your Koolaide now!

  17. Kevin says:

    Dude! You really need to borrow Rick’s violin!

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