Hospital spending is at a historic low, new report finds

A new report finds historically low hospital spending growth, and overall healthcare spending growth has dropped to a percentage close to the historic slowdown prior to expanded coverage under the Affordable Care Act.

A new analysis finds that hiring within the health sector moderated in August but spending growth slowed.

Driving the low overall spending growth is hospital spending, which is at a historic low, according to an analysis of health economic indicators from Altarum’s Center for Sustainable Health Spending. Indeed, hospital spending, at a revised .8% June growth rate, is the lowest year-over-year monthly growth rate recorded in more than 25 years.

“We have seen private sector reports that indicated slowing hospital utilization, so have been puzzled that the data continued to show high hospital spending growth,” said Paul Hughes-Cromwick, co-director of Altarum’s Center for Sustainable Health Spending, in an announcement. “This month, with these downwardly revised data, we are now seeing historically low hospital spending growth, and overall healthcare spending growth has dropped to the 4% range reminiscent of the historic slowdown prior to expanded coverage under the ACA.”

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The health sector only added 20,000 jobs in August after a two month growth spurt (41,000 in July and 36,000 in June). The August statistics are consistent with the slower level of growth seen in the first five months of the year.  “This makes sense,” said Hughes-Cromwick. “Because those higher rates did not align with an overall slowdown in spending growth.”

Hospital hiring is continuing to grow at about two-thirds the 2015 and 2016 pace (6,000 versus 10,000-11,000 new jobs per month), according to Altarum. With indications of declining hospital utilization and reports of potential job losses at individual hospitals, analysts expect further declines in hospital job growth in the coming months.

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The spending report (PDF) indicated national health spending in July at $3.49 trillion was was 4.1% higher than health spending in July 2016. Spending on home healthcare grew the fastest, at 6.6%, according to the brief, while spending on hospital care was slowest at 1.1%. The health spending share of GDP fell to 18%.

Healthcare job growth moderated in August after the early summer surge, according to the labor report (PDF). Hospitals added 6,400 jobs, while ambulatory care settings added 11,000 jobs, and nursing and residential care added 2,800 jobs. The health share of total employment (just barely) reached a new all-time high of 10.77%, analysts noted.

Altarum also reported in a pricing brief (PDF) that the annual healthcare price growth (1.5%) remained at the lowest rate since May 2016—pushed down by large declines in nursing home care price growth and other professional services. The briefing also noted a growth in prescription drugs (4.2%, up from 3.8% in June), however the growth rate is still well below its 20-plus year high of 7% recorded in November 2016.