Decomposition of the drivers of the U.S. hospital spending growth, 2001–2009
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Authors
Wu, Vivian Y.
Shen, Yu-Chu
Yun, Myeong-Su
Melnick, Glenn
Subjects
hospital
Oaxaca-blinder
decomposition
prices
Oaxaca-blinder
decomposition
prices
Advisors
Date of Issue
2014
Date
Publisher
BioMed Central
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Abstract
Background: United States health care spending rose rapidly in the 2000s, after a period of temporary slowdown in the 1990s. However, the description of the overall trend and the understanding of the underlying drivers of this trend are very limited. This study investigates how well historical hospital cost/revenue drivers explain the recent hospital spending trend in the 2000s, and how important each of these drivers is.
Methods: We used aggregated time series data to describe the trend in total hospital spending, price, and quantity between 2001 and 2009. We used the Oaxaca-Blinder method to investigate the relative importance of major hospital cost/spending drivers (derived from the literature) in explaining the change in hospital spending patterns between 2001 and 2007. We assembled data from Medicare Cost Reports, American Hospital Association annual surveys, Prospective Payment System (PPS) Impact Files, Medicare Provider Analysis and Review (MedPAR) Medicare claims data, InterStudy reports, National Health Expenditure data, and Area Resource Files.
Results: Aggregated time series trends show that high hospital spending between 2001 and 2009 appears to be driven by higher payment per unit of hospital output, not by increased utilization. Results using the Oaxaca-Blinder regression decomposition method indicate that changes in historically important spending drivers explain a limited 30% of unit-payment growth, but a higher 60% of utilization growth. Hospital staffing and labor-related costs, casemix, and demographics are the most important drivers of higher hospital revenue, utilization, and unit-payment. Technology is associated with lower utilization, higher unit payment, and limited increases in total revenue. Market competition, primarily because of increased managed care concentration, moderates total revenue growth by driving lower unit payment.
Conclusions: Much of the rapidly rising hospital spending growth in the 2000s in the United States is driven by factors not commonly known or well measured. Future studies need to explore new factors and dynamics that drive longer-term hospital spending growth in recent years, particularly through the channel of higher prices.
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Article
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The article of record as published may be found at https://doi.org/10.1186/1472-6963-14-230
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Citation
Wu et al.: Decomposition of the drivers of the U.S.
hospital spending growth, 2001–2009. BMC Health Services Research
2014 14:230.
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.