Healthcare News & Insights

Healthcare spending rising: What hospitals need to know

Hospital execs would be wise to stay informed of projected healthcare spending trends due to changes brought on by the Affordable Care Act.

179967011Reason: As spending changes, pressure will rise for hospitals to play a bigger role in keeping costs at a manageable level, whether it’s by providing higher quality care or encouraging patients to seek more affordable healthcare options instead of emergency department visits.

Where healthcare spending is going

So your hospital can stay in the loop, here are some projected healthcare spending trends over the next few years, taken straight from a report by the Centers for Medicare & Medicaid Services (CMS) published in Health Affairs.

According to the report, “the combined effects of the Affordable Care Act’s coverage expansions, faster economic growth and population aging are expected to fuel health spending growth this year.” For 2014, health spending is projected to grow by 5.6%.

Over the next seven years, healthcare spending will grow a little more, by 6% a year. While this is a modest increase over recent years, it’s not expected to meet levels reached from 1990 to 2008, when healthcare spending grew by an average of 7.2% each year.

The authors of the report say that the recent recession has kept healthcare spending from reaching these limits. And while spending has picked up because millions more patients have gotten private insurance from the Affordable Care Act, this effect is somewhat dampened by high co-pays and deductibles.

Another trend to watch in healthcare spending is the changing needs of an aging population. The number of Medicare beneficiaries is expected to grow in the next seven years. So over time, spending in this area will rise (though growth will remain at manageable levels because of existing payment caps, according to an article in the New York Times).

And if you haven’t already, your hospital will likely be seeing many more patients with Medicaid in the coming years. By 2015, the federal government will be spending $323 billion on Medicaid, an increase from $254 billion. States will be spending $218 billion on Medicaid themselves, up from $195 billion.

Prescription drug spending will also be on the rise. This is due to a combination of increased healthcare coverage across the board and the rising costs of medication in general.

Each of these factors will contribute to a bigger chunk of the nation’s budget going toward healthcare spending. And that will increase federal scrutiny on just what hospitals are doing to keep healthcare costs under control.

It would be wise to start shifting your focus to factors like being up front about pricing for services and providing value-based care now, so your facility won’t be under the microscope later.

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