healthcare spending
Employee Benefits

Looking for Healthcare Savings in All the Wrong Places

Den Bishop
Den Bishop
Senior Advisor

Although it was 1980, I can remember it like yesterday. I’m sitting in the annual Howdy assembly at Wichita Falls High School when country superstar (OK, I’m exaggerating because I think it was his only hit) Johnny Lee walked on the cafeteria/auditorium (it was the same thing) stage to sing “Looking for Love.” You know the song…”Looking for love in all the wrong places.” Reading the Health Care Cost Institute’s 2016 Health Care Cost and Utilization Report that was just released reminded me of this high school melody. It seems to me healthcare may be looking for savings in all the wrong places.

Here are a few love notes from the report.

  • It’s the prices, stupid! Utilization of inpatient, outpatient, and professional medical services have all dropped since 2012. We use less healthcare service now than we did then. However, costs for employers and employees haven’t gone down because the prices for healthcare services for all categories have risen each and every year since 2012. In essence, we’re paying more for fewer services!
  • Opioid abuse isn’t America’s only drug problem! Pharmaceutical spending is by far the fastest growing category with an increase of over 27 percent between 2012 and 2016. The price per drug increased 24.9 percent over the period. At $1,030 per person per year, pharmaceutical spending is on the verge of overtaking inpatient hospital spending, which was $1,049 per person. Think about the time, energy, and investment that has been made over the past two decades to curtail inpatient admissions, average length of stay, and other inpatient hospital expenses. The cost control backdoor was left unguarded as the pharmaceutical industry snuck in!
  • Your Emergency Room prices need surgery! Outpatient facility spending is almost 50 percent greater than inpatient. With the sprouting of freestanding emergency rooms, one might assume the number of emergency room visits is increasing. That assumption is correct. Emergency room visits have increased a whopping 2 percent since 2012. Prices for emergency rooms visits have increased 31 percent over the same period. Employer efforts to manage the utilization have worked, but the contract failures mean total costs have risen 34!The second wave of outpatient cost creep is surgery, but this one also gets you within the inpatient category. Inpatient surgery prices have increased 30 percent while outpatient surgery prices have increased 19 percent. Utilization for both inpatient and outpatient surgeries has decreased. Bottom line…employers are paying more for fewer surgeries.

Where’s the love? Much like Johnny Lee, employers are actively searching for answers. The data tells us to look if we want to find true love…or true savings.

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