The cost of healthcare is still growing, but it’s growing at a rate that Pricewaterhouse Coopers analysts say has slowed and will likely continue to do so.
Healthcare organizations still seem to be nursing what PwC’s Health Research Institute calls a “recession hangover” but are also under the influenced of larger dynamics that are creating long-term changes in the market. In its annual medical cost trend report, the firm says those organizations should get used to more modest growth rates. “We believe this is a new trend,” Kelly Barnes, partner and U.S. health industires leader for HRI, says in a video accompanying the report.
The firm projecting a 6.5 percent cost in the growth of healthcare costs for 2014, based on research on activity in the market that serves employer-based insurance. That’s one percentage point less than its estimate for 2013, and two less than its estimate for 2012.
There are a few factors that PwC says play into the slowdown of cost growth:
- Healthcare reform. In light of reimbursement penalties, hospitals are working to bring down readmission rates. Government data suggests there were 17 percent fewer readmissions in 2012, a trend that’s expected to accelerate.
- Retail, mobile and the internet. Routine care is being driven out of costly in-patient facilities and toward drug store clinics, urgent care centers, telehealth services and mobile health tools.
- Employers are getting engaged. Large companies like Wal-Mart and Lowe’s are contracting directly with health systems for certain procedures, driving their employees to high performing networks.
- Employees are getting engaged, too. At the same time, high deductible health plans are becoming increasingly popular among employers. That means employees are paying more out-of-pocket, and they’re paying more attention to what they’re buying and what they’re paying for it.
But let’s not forget that even though medical costs aren’t growing as quickly, they’re still growing. These factors are tipping the scales:
- Biologic drugs. More targeted biologic therapies are being developed and approved. Because they cost more for drug companies to develop and for patients to buy, they’re adding costs to the system.
- Health system consolidation. Last year saw a 10-year high in the number of transactions among health systems, Barnes said, and that number doesn’t even include joint ventures and collaborations. Although these consolidations are boosting costs now, they will likely reduce them in the long run. “There are long term gains in this consolidation that’s going to happen,” Barnes said. “We’re really driving for population health; we’re driving for quality and value, and scale is a part of that.”
[Graphic from PwC Health Research Institute]
