Price increases, utilization shifts, and intensity of care: Health care trends since 1977

Price increases, utilization shifts, and intensity of care: Health care trends since 1977

By Cibeles Duran

Price increases, utilization shifts, and intensity of care: Health care trends since 1977

By Cibeles Duran
Changes in the industry through the decades highlight the sometimes-misaligned relationship between utilization and spending.

A new study reveals that expenditures in health care far outpace the level of utilization. The population in the United States has grown by 57 percent since 1977, while total expenditures for care have increased by 208 percent. Though rising prices would seem the obvious cause, various factors contribute to today’s high rates of spending.

Miami Herbert researchers Karoline Mortensen, Michael T. French, and Emma Boswell Dean, together with University of Maryland’s Nianyang Wang and Jie Chen, analyze the changes in utilization and spending across the various sites of care from 1977 to 2017, using information gathered from the Medical Expenditure Panel Survey (MEPS). Their study, published in Medical Care, provides total instances of the use of medical facilities, including hospital inpatient stays, emergency department visits, outpatient physician visits, outpatient nonphysician visits, office-based physician visits, and dental visits. The study also delineates the sources of payment (mainly out-of-pocket, private insurance, Medicare, or Medicaid) for all services rendered, hence providing insight into the interrelationship between health care use and spending throughout the decades.

Notably, steep increases in expenditures do not necessarily correspond to the level of use of health care facilities. Spending on inpatient visits, for instance, has increased by 52 percent, even though the number of inpatient stays has decreased. Meanwhile, emergency department visits have risen by 47 percent, while expenditures in this area have soared by an unaligned 360 percent.

“Prices are going up, but so is the intensity of care,” Mortensen says. “Patients are paying more because prices are increasing and they are getting more intensive services.”

The more limited options of the past meant more affordable health care, but improvements in technology signify increased forms of medical attention, as well as enhanced facilities with greater service capacity. Patients increasingly opt for outpatient and office-based physician visits that may now offer extensive services. Since 1987, the number of visits to outpatient nonphysician facilities also climbs. Hospitals consequently face stronger competition from outpatient facilities and office-based physicians than in the past, though Mortensen points out that hospital management used the augmented outpatient capacity to ease overcrowding during the more critical months of the COVID-19 pandemic, when hospital providers often delegated some of the therapies, like the Regeneron antibody cocktail, to outpatient providers.  

Advancing technology and shifts in site preferences are not the only factors spurring arrays of rendered services that escalate charges. A fee-for-service system may also contribute to the “unsustainable spending growth,” as cited in the study. Doctors under this system have an incentive to carry out more services, as do hospital managers that seek to fill beds, together creating an environment of perhaps excessive intensity of care that exacerbates already rising prices.  

Some movement towards more value-based payment systems already occurs. Mortensen cites the global budget approach currently in trial in Maryland as a potential alternative. Here, a commission within the state allocates funds according to fixed or pre-determined prices. Hospital billing personnel then regulate for the volume of actual care delivered by adjusting charges to the patient. The guaranteed revenue source allows hospital management to invest in working with outpatient facilities to control for conditions like asthma or diabetes instead of seeking to bring patients into the hospital. Maryland hospitals have also remained better protected financially during the pandemic due to the ensured budgets.

There is some promise in recently passed legislation that addresses surprise billing scenarios. The vast majority of people in the United States do not use any health care facility in a given year, signifying no related costs incurred. However, among those who use the services, unexpected fees could surpass $100,000, causing intense burdens on patients.

“We tend to direct our attention to the really expensive areas, like how much we spend on inpatient care, but we also need to pay attention to the lesser told stories of the data,” she says.

The study includes the added dimension of prescription fulfillment and corresponding out-of-pocket expenses. Prescription drugs account for about 10 percent of overall expenditures in health care, even while 40 percent of the population do not take any pharmaceutical medications. Within the 60 percent that do, more people are fulfilling 12 or more prescriptions per year, again attesting to the influence of advancing technology as pharmaceuticals address a greater number of conditions.

Mortensen warns, however, that this influence may cause additional, yet unknown impacts within the industry. The advent of telehealth, accelerated by the coronavirus health crisis, for instance, may signify a permanent change in patient preference. Meanwhile, delayed care during the pandemic, such as postponed cancer screenings and other important wellness checkups, may result in diagnoses of aggravated conditions, likely further impacting the relationship between use and spending in health care.