Hospitals are hiring but their prices are growing at the lowest rate since 1999, according to a new report by the Altarum Institute’s Center for Sustainable Health Spending,.
Prices for goods and services in hospitals grew by only 0.9 percent in December compared to 2013, a more than 16-year low, according to the center’s Health Sector Economic Indicator study.
Meanwhile, prices for the entire healthcare sector in December were 1.8 percent higher than in December 2013.
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Senior health economist Paul Hughes-Cromwick said price growth of less than 1 percent means hospitals are unable to raise prices to private payers -- the largest segment covered -- probably due to competition and pressure by insurers to lower prices.
“It’s a gigantic arm wrestling contest. The government and insurers are winning over the providers,” Hughes-Cromwick said.
The figures are in direct contrast to the commonly-held belief that due to consolidation, hospitals have pricing power, he said.
Prices for goods and services in hospitals grew by only 0.9 percent in December compared to 2013. - Tweet this
“Maybe they do,” he said, “but they’re not using it yet.”
Yet the brake has lifted on hiring. Over the past six months, hospitals added 9,600 jobs and physician offices 13,400 jobs, according to the Center. The total 213,000 health jobs added in the last six months represents the biggest gain in nearly 25 years, according to the report.
The last three-month increase of 127,000 jobs is the largest quarterly increase since 1990, when the Center began collecting data.
“We noticed this pick-up throughout ’14 and the main explanation that we’re promoting is that we have overall economic growth that you can see in non-health employment,” Hughes-Cromwick said.
As jobs grow, people gain health insurance coverage and get care. People are also getting coverage through insurance exchanges and Medicaid expansion.
“We had a weak 2013,” Hughes-Cromwick said. “For a long time, the foot was on the brake, now it’s being let up a little bit.”
Health sector employment has been adding 39,000 new jobs per month since the fourth quarter of 2014, according to Health Sector Economic Indicators. The trend continued into January, with 38,300 new jobs added, the report states.
[Also: Healthcare adds 38,000 jobs in January]
In other statistics, December prescription drug prices rose 6.4 percent, a growth rate not seen since 1992, well up from 4.6 percent in November.
Home health care prices rebounded from their earlier negative growth trend, recording a 1.9 percent growth rate in December, above the November rate of 1.4 percent, their highest reading since July 2009.
Experts are waiting on the Quarterly Services Survey coming out March 11, when the monthly Health Sector Trends report will include figures on health spending from 2014.
Preliminary estimates indicate national health spending grew by 5 percent in 2014 and by 5.6 percent from December 2013 to December 2014. This was up significantly from the official 2013 national spending growth rate of 3.6 percent, the all-time low, according to the Feb. 13 report.
The health spending share of gross domestic product was 17.8 percent in December, up from 16 percent at the start of the recession in December 2007.
Twitter: @SusanMorseHFN