Healthcare

Medical cost trend: behind the numbers 2016

Max Parkinson

Max Parkinson

Each year, PwC’s Health Research Institute (HRI) projects the growth of private medical costs in the coming year and identifies the leading drivers of the trend.

 

HRI’s analysis measures spending growth in the employer-based market—the foundation of the U.S. health system, covering about 150 million Americans. In its tenth report in the series, Behind the Numbers 2016, HRI projects the medical cost trend to be 6.5% in 2016 — slightly lower than the 6.8% projected for 2015. The net growth rate in 2016, after accounting for benefit design changes such as higher deductibles and narrow provider networks, is expected to be 4.5%. When HRI made its first projection of healthcare spending, the growth rate for 2007 was nearly 12%. Understanding the factors that have slowed spending growth will enable health organizations of the future to thrive in the New Health Economy.

 

Hospital costs contribute over one-third of total health spending for the privately insured. In response, more care has shifted to less expensive ambulatory centers, retail health clinics and physician offices. Since 2003, the number of outpatient visits has increased 12% while inpatient care has decreased by nearly 20%. The 2016 report notes that “For the first time in 16 years, we’ve seen a decrease in hospital prices and this could be a sign that changes in patient delivery models are indeed impacting costs.”

 

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As a result of this trend, hospitals may need to shift focus to funding outpatient programs and patient education and adjust budgets accordingly.

 

Questica Budget is a collaborative web based budgeting tool that provides a controlled environment for budget input, review, approval and maintenance. It allows healthcare officials to determine how far in advance they want to plan. The budgeting software gives the organization the ability to add data and make modifications, and then roll the information forward into future years without any issues. Running different “what-if” scenarios for increases (i.e., 1% vs. 2% increase) in outpatient visits is straightforward, and the impact of each scenario is immediately understood. Questica Budget also offers a tool that allows hospitals to input their unique staffing requirements, salary and premium information to forecast their anticipated staffing costs. If you would like to solve the cumbersome process of assembling, tracking, analyzing, and reporting of capital and operating budgets, take the first step today and request a demo of Questica Budget.

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