In this episode, we are joined by John Hargraves, senior researcher at Health Care Cost Institute, to discuss HCCI’s report on trends in healthcare spending, utilization and pricing among Americans with employer-sponsored insurance.
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Highlights of this episode include:
- Background on HCCI’s study that looked at healthcare spending from 2013 to 2017 using claim data from over 40 million people.
- Why per-person spending has increased to its current level of $5641 per person.
- What four high-level categories are used to show the distribution of spending.
- Reasons behind the significant increases in outpatient spending.
- And more…
Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast®.
Recently, the Health Care Cost Institute released their 2017 Health Care Cost & Utilization Report which looked at healthcare spending, use and prices for individuals under 65 covered by employer-sponsored insurance.
To explain the findings of the report, I’m joined by John Hargraves, a senior researcher HCCI.
John oversees HCCI’s research blog, Healthy Bites and data visualizations. He’s also a co-author of the annual Healthcare Cost & Utilization Report and contributes to the development of HCCI’s Qualified Entity Initiative. His research focuses on the impact to policy and regulatory changes on healthcare spending and service use.
John, welcome to the podcast!
John Hargraves: Hi Mike. Thanks for having me.
Mike: So John, for those that may not be familiar with HCCI and the work you do, why don’t you explain that for us?
John: Yeah, sure. So the Healthcare Cost Institute (HCCI) was created in 2011. We’re a non-partisan/non-profit research organization focused on understanding the drivers of healthcare spending in the US.
Most of our work focuses on the privately insured, so people who get their health insurance through their employer. Yeah, we try to get out as much good research and downloadable data as possible.
Mike: Yeah, and certainly, the research we’re going to talk about today is very much in-depth, and I think with some very interesting results. So let’s talk about that. What we are talking about is the 2017 Healthcare Cost & Utilization Report.
John, explain what the analysis entailed and what you were looking at.
John: Yeah, sure. Every year, we publish our Healthcare Cost & Utilization Report which explores the recent trends in healthcare spending, prices and use for the employee-sponsored insured population.
So, the 2017 report looked at healthcare spending from 2013 to 2017. And the report is based on billions of claims for over 40 million people.
The goal of the report is really to shed some light on healthcare spending of the privately insured because it’s a sector that hasn’t been extensively studied. It’s sort of the Medicare and Medicaid population because data hasn’t been readily available until relatively recently.
Mike: That’s a great setup. And so let’s go right to the top line of the report. And you found that per person spending increased to $5641 per person. But there’s a lot of detail behind that. Can you break that down for us?
John: Yeah, sure, Mike. So, one of the goals of the report is describe not only the level of spending, but how we got there. So in 2017, per spending was, as you said, $5641 per person. And that’s a result of continuous growth in spending which totaled 16.7% in five years.
And then, we kind of break down spending into four high-level categories—in-patient, outpatient, professional services, and prescription drugs—just to get a better idea of the distribution of spending, where the growth is really coming from.
Professional services, that’s physician services primarily. It’s about 34% of spending in 2017. Outpatient was 28%, in-patient was 20% and prescription drugs was 19%.
Mike: And of those categories, outpatient spending increased more than any other category. What can you tell us about that, John?
John: Yeah. So, outpatient spending increased 5.1% in one year from 2015 to 2017. So that’s a relatively high growth. It’s faster than the other three categories’ spending.
And the majority of that growth came from increased spending on emergency room and outpatient surgery visits. So, ER spending grew faster than any other outpatient service, increasing 36% over five years. So that’s a pretty rapid spending growth.
Outpatient surgery, it grew 14% in spending over five years. But outpatient surgery is the largest share of outpatient spending categories. So that 14% translates into a large increase in actual dollars.
Mike: And that’s interesting. You can certainly I think justify the outpatient surgical portion of that because so much of those types of procedures have been pushed to the outpatient setting.
But I was a little bit surprised by the emergency room stat because you think these days of urgent care centers, I know they’re popping up all over the place around here, there’s just lots of other ways for people to get care in a somewhat emergency setting without going to the emergency room.
Did that surprise you?
John: Not really. Actually, emergency room cost and prices is an area we’ve looked at before in more detail. And it’s presented in this annual report—and all the way down to the CPT level, like the five levels of severity of ER visits. And we definitely saw increases in spending and the prices for each type of an emergency room visit and not really a huge shift in use.
So, a lot of that urgent care, you would expect to maybe decrease in use if you think of urgent care instead of an emergency room. But again, those would be the least severe and less costly sort of emergency room visits.
But overall, we really just saw use is flat. When we looked at those specific CPT codes, overall visits and the procedures in emergency rooms, we see it increased a little bit. But price is a big driver in emergency rooms.
Mike: So, not an increase in use as much as an increase in price, got it.
And that is a good segue way to my next question because you did look at utilization across a wide variety of healthcare services. Can you break down what you found there?
John: Yeah. So as we said, we kind of break spending into use and average price. And overall, on a high level, we didn’t really see any change in healthcare use over five years. It’s pretty flat. And when we talk about use, we do—and the numbers in the report, we’ve adjusted for changes in the service intensity mix. We tried to think about the same services in 2013 and 2017 and account for any changes in technology or things that might have become more or less service intensive or people utilizing more intensive services. But again, use is flat even after that adjustment.
But we see variations once we look at specific service categories and sub-categories. One example is in-patient admissions which we saw a 5% decline in over the five years. And within in-patient admissions, medical and surgical admissions declined. But admissions for mental health and substance use increased over that period.
So, one thing we tried to get at in the report is that there are a lot of variations. And it’s important to kind of—yeah, that overall number is great as a benchmark. And it is tied to policy and overall spending. But when I was looking at specific services people use, it’s nice to get down to different categories and see what the drivers are and what’s really happening in terms of what services people are using and how much they’re paying for it.
Mike: Sure! And of course, probably everyone would expect to hear that their pricing has gone up over the period that you study.
But talk to us about how the prices changed over the period that you studied? Was it in certain categories or certain areas that sort of drove that overall price increase that you saw?
John: Yup, you’re right there. Prices do play a big factor in healthcare spending of this population. When spending has been increasing and use has been staying the same, it all comes down to price.
And so, we saw 17.1% increase in average prices between 2013 and 2017, particularly high-price growth in outpatient settings which is 18.9% over five years. In-patient is lower at 15.6%. Professional services had the lowest growth with 12.4%. And then, prescription drugs is 25%.
I looked at it, prescription drugs, estimates don’t include rebates, but they’re the negotiated prices. So it could be lower.
Mike: So prescription drugs is clearly playing a big role in the overall price increase, yeah. Maybe not as surprised there either.
And one thing I was a bit surprised about was what you found around the changes in out-of-pocket costs. Talk to us about that.
John: Yeah, we looked at out-of-pocket costs which includes co-payments, co-insurance and deductibles. It does not include premiums people pay. And we’ve looked at the growth of out-of-pocket spending and total spending. And out-of-pocket spending was lower than total.
So, although people were paying more out-of-pocket every year, they’re actually paying a smaller share of the total spending each year because total spending was growing faster. So, although it might not seem like patients are bearing less cost because they’re paying more each year, it’s actually a smaller piece of the pie that is coming out of the patients’ share.
That was a little surprising.
Mike: Yeah, it is. And of course, they’re also paying that through premiums too because premiums are rarely flat these days, right?
John: Exactly, yeah. So, sort of shifting some of the outpatient burden from co-payment, co-insurance, deductible side to the premium side. It could be a factor there.
Mike: Well, very interesting work here, John. If someone would like to get a copy of the report and look through all those details for themselves, where they can go?
John: They can go to our website which is HealthCostInstitute.org. And on the home page, they’ll see a link for the annual report as well as some of our other research. We’re always coming out with new stuff, so check it out!
Mike: John Hargraves, thanks so much for joining us today on the Hospital Finance Podcast.
John: Thanks for having me Mike.