Healthcare prices are growing at a rate that’s slower than the overall inflation rate, and there are signs that this trend may be the new normal.
In series of briefs on healthcare spending, employment and price growth, Altarum said it found that the Health Care Price Index (HCPI) increased by 1.5% last month compared to an inflation rate of about 2% for the entire economy.
And this is no statistical blip.
Instead, it marks the 16th month in a row that inflation in the economy as whole has outpaced inflation in healthcare, indicating that the reversal of long-time trends could be here to stay. For hospitals, that means it’s become increasingly necessary to take a good, hard look at cost structures, Paul Hughes-Cromwick, co-director of sustainable health spending strategies at Altarum and the report’s author, told FierceHealthcare.
“For years now, hospital systems—especially national systems—have devoted themselves to being able to provide care at either Medicare rates or not much above that,” Hughes-Cromwick said, “and the systems that are failing are the ones that haven’t been able to reduce their cost structure or clinical integration enough to do so.”
The trend is also a signal that value-based care is starting to gain an effective foothold in the industry, which has been sluggish to adopt these new models, he said.
Focusing on high-value care remains a struggle, but the signs are positive, Hughes-Cromwick said. And that’s in spite of political efforts to undermine or fully eliminate the Affordable Care Act, which put a spotlight on value-based care in addition to the insurance coverage provisions.
“Some of the main goals and thrust of the ACA are coming to play and putting pressure on prices, putting pressure on spending,” he said. “It’s a battle, but we’re trying to get low-value care out of the equation.”
Job growth in healthcare remains steady as well, according to the briefs. Hughes-Cromwick said that industry watchers had expected to see job growth take a downturn following a surge in the wake of the ACA’s full rollout, but trends have instead held steady.
Altarum noted a similar finding in its report on trends in healthcare for the second quarter of this year.
Hughes-Cromwick said that industry experts have a number of theories to explain this trend but haven’t pinned down a definite reason that job growth hasn’t taken a downturn. For example, the population is aging and thus leaving their jobs, which could spur hiring even if there aren’t new positions being created.
Some health systems may be “hoarding” staff members, too, he said. For instance, they may be hiring as many nurses as possible away from competitors. It’s also unclear whether these positions are in the traditional hospital inpatient setting, or are focused more on outpatient care.
“The labor [data] is somewhat of a paradox,” Hughes-Cromwick said. “We keep thinking hiring growth will slow, and it may have to some extent, but not as much I think as we were predicting.”