Hospital Costs Are Exploding — And Show No Signs Of Going Down

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Julia Cohen Reporter
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Hospital costs have skyrocketed since 2000, and they are showing no signs of slowing down.

Total hospital expenditures grew from $415.5 billion in 2000 to just under $1.1 trillion in 2016, according to Center for Medicare and Medicaid services data. That’s about a 160-percent increase over 16 years.

In contrast, prescription drug spending increased from $121 billion in 2000 to $328.6 billion in 2016 — a 172-percent increase.

The main difference between the two is the growth in out-of-pocket costs. Out-of-pocket costs for prescription drug spending increased 33.9 percent from 2000 to 2016. Out-of-pocket spending for hospital care grew 144 percent during that same time period.

“[We have] extremely narrow margins … unlike pharmaceutical companies,” Terry Lynam, a spokesman for Northwell Health hospital system, told Axios on Wednesday. The company is “always looking for ways of reducing the cost of care,” Lynam said.

Uncompensated hospital care is increasing at the same time as out-of-pocket spending. The total value of uncompensated care increased $2.6 billion from 2015 to 2016, the first time in three years, according to a Becker’s Healthcare article.

“Higher out-of-pocket-costs from cost-sharing have made patients responsible for an increasing percentage of the bill,” Jonathan Wiik, principle for health care strategy at TransUnion Healthcare, told Becker’s. “Most patients simply cannot afford that, and hospitals need to make sure they’re actively engaging their patients to ensure they have funding mechanisms for the care needed.”

Uncompensated care decreased slightly after 2016 with the passing of Obamacare, but that number is expected to creep up again in 2018, a Healthcare Dive article explains. Moody’s Investor Services expects hospital debt to grow 6 to 7 percent in 2018, according to the Healthcare Dive article. (RELATED: Drug Companies Are Influencing Medicaid’s Preferred Drugs With Big Dollars)

Labor shortages are also contributing to rising hospital costs. The U.S. has to hire 2.3 million health care workers, including doctors, nurses and physicians assistants, by 2025 in order to handle an influx of elderly patients, CNN reported in May.

By 2025, there will be a shortage of 11,000 physicians and surgeons, according to the CNN report. Labor shortages often mean raising pay to entice new professionals. Pay raises will raise hospital costs even more — and those costs will be passed on to insurance companies and patients.

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