Hospitals, Drugs Lead Rise In Health Spending; Inflation Tame

ANN ARBOR — National spending on health rose 5.2 percent in 2014 over 2013 levels, according to the monthly Health Sector Economic Indicators released Monday by Ann Arbor-based health consultants Altarum Institute.

The figures show preliminary estimates for February show the trend continuing into 2015, with 6.6 percent growth over February 2014. Spending in February increased in all major categories. Prescription drugs grew the fastest, by 10.5 percent, and hospital spending also rose rapidly at 9 percent.

The figures from Altarum’s Center for Sustainable Health Spending show that the health spending share of gross domestic product was 17.9 percent in January, slightly below the 18 percent all-time high rate hit in December 2014.

Health care prices in February 2015 were 1.4 percent higher than in February 2014, barely above the January year-over-year change of 1.2 percent. The February 2015 12-month moving average held at 1.5 percent. Year-over-year hospital prices rose a scant 0.4 percent in February, rebounding from last month’s fall of 0.1 percent — which was the only negative reading in the history of the Altarum data. Physician and clinical services prices were flat, as in January. Prescription drug prices rose 5.2 percent and, after the 6.4 percent growth rate in December and 5.6 percent in January, are the highest since May 2002.

The health sector added 22,000 jobs in March 2015, close to the 24-month average but below the 12-month average gain of about 30,000. Hospitals added 8,000 jobs in March and are averaging 10,000 new jobs per month in the first quarter of 2015. Ambulatory care settings gained more than 19,000 jobs, close to the 12-month average. However, nursing and residential care lost nearly 5,000 jobs this month and is showing no growth in 2015.

The health share of total employment increased slightly to 10.59 percent, which is still below the high of 10.66 percent last seen in December 2012. Health job growth is once again exceeding non-health growth at 2.5 percent year over year versus 2.2 percent.

See the full report at www.altarum.org/HealthIndicators.

“Our updated estimates show 2014 health spending growth at the highest rate since 2007, with this acceleration apparently continuing into 2015,” said Charles Roehrig, director of the center. “While data for 2015 are preliminary, the spending increase, especially in the hospital sector, does align with hospital job growth. Our March 25 Health Sector Trend Report provides additional detail on 2014 health spending.”

Altarum provides research and consulting to the health care industry. It has almost 400 employees and additional offices in the Washington, D.C., area; Portland, Maine; and San Antonio, Texas.

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