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From Health Affairs:


What Lies Ahead for US Hospitals?


Health Affairs Explores Post-Recession and ACA Environments


Bethesda, MD -- Health Affairs’ May variety issue examines a number of concerns facing US hospitals in the wake of the recession and implementation of the Affordable Care Act (ACA). Several papers also analyze trends in US health care spending.


Per capita health care spending growth for males outpaced females, while the oldest continued to spend the most from 2002–2010. David Lassman of the Centers for Medicare and Medicaid Services and colleagues examined personal health care spending in the United States for selected years from 2002–2010 and found that the average elderly person spent $18,424—three times more than working-age adults and five times more than children. Yet the annual growth in spending for people ages sixty-five and older increased at the slowest annual rate (4.1 percent) and for children it was the fastest (5.5 percent). Growth in spending for males outpaced females, driven by a closing of the gender gap across most payers and goods and services, but most dramatically for prescription drug spending. The researchers also discussed the impacts of aging baby boomers, the recession, and the implementation of Medicare Part D during this period.


EDs are already money makers for hospitals, and the ACA could push profits even higher. Michael Wilson of Harvard Medical School and David Cutler of Harvard University examined 2009 hospital financial reports and patient claims data and found a 7.8 percent profit margin that year in emergency department (ED) revenue over costs, or $6.1 billion. They found that the profits stemmed largely from privately insured patients, compensating for underpayments from other groups. Of the 120 million ED visits analyzed, 35 percent of patients were privately insured, 26 percent were covered by Medicaid, 21 percent by Medicare, and 18 percent were uninsured. As more Americans gain insurance through the ACA, hospital-based EDs stand to increase their profit margins with a changing insurance payer mix. Policy makers looking to reduce health care costs, say the authors, should be cognizant of the dependence of ED profitability on payer mix and its implications for hospital-based accountable care organizations with varied patient populations.


An estimated $84.9 billion in uncompensated care was provided in 2013. ACA cuts could pose a challenge to some providers. Teresa A. Coughlin of the Urban Institute and colleagues found that at least 65 percent of providers’ uncompensated care costs were defrayed through government payments in 2013, with Medicaid ($13.5 billion) and Medicare ($8.0 billion) offsetting the most. To help cover the costs of the significant expansion afforded by the ACA and to recognize the expected reduction in providers’ uncompensated care because of fewer uninsured people, federal payments to hospitals for care to the uninsured are scheduled for reductions starting in FY 2014 for Medicare and FY 2016 for Medicaid. For the year examined, hospitals provided an estimated 60 percent of all uncompensated care. With twenty-five states either rejecting or still debating Medicaid expansion, the authors caution state, local, and federal policy makers to carefully consider the effects of cuts in funding for indigent health care services, especially to the safety-net providers who are likely to continue to serve patients without the ability to pay for their care.


In key years between 1980 and 2006, growth in health care spending is linked to rising costs of treatment. Martha Starr of American University and coauthors analyzed data from four nationally representative surveys on sources of spending growth and found that 70 percent of growth in real average health care spending over that period was generated by rising costs of treatment, or average cost per case. They found that the aging of the population and shifts in insurance coverage have played a minimal role in spending growth, while increases in the treated prevalence of diseases or conditions have contributed moderately. They also noted that while real per capita health care spending grew at 3.5 percent per year, shifts away from the use of hospital services prevented that rate from being even higher. The authors recommend further analysis of condition-specific spending trends and a careful tracing of the effects of medical innovations to inform a better understanding of these patterns.


Several papers address health disparities, including Socioeconomic Status And Readmisssions: Evidence From An Urban Teaching Hospital by Jianhui Hu of the Henry Ford Health System and colleagues.

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically at The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a one-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.