When you follow the healthcare sector, you can depend on December being the time CMS and Health Affairs release cost growth estimates from the prior year. All the papers give the news big time attention (see here).
After looking at the charts annually, you inure to the trends. It is like gas prices. You just know when something breaks course, and you need to dig deeper. 2014 does not disappoint. My eyes always go right to the hospital sector:
After several post-recession years of overall restrained spending, 2014 exhibited the expected increases most predicted. The greater number of insured individuals stemming from the ACA expansion and more confidence in the economy opened the spigot. Hospitals, in particular, went on a big time hiring binge (hospital revenue has increased, but operating expenses, i.e., labor, have chipped away at margins). The 4.1% increase preceded the workforce expansion we now see in 2015 (figure below). In fact, the rate of growth for hospitals will probably hit 6% this year, far in excess of U.S. GDP.
If you have been spending time on the wards, you probably have not felt a huge influx of educators and in-house transition coaches. Nor have you seen ward pharmacists, additional aid from NPs or PAs, or the always welcome nutrition teams or diabetes educators. You know, people we actually need. You have not seen any of these individuals because the hires have occurred in hospital-controlled outpatient facilities, community-based outreach networks, data crunchers, and back office types.
The pop in hospital spending will do just that at some point: pop. Favorable budgetary conditions laid the groundwork for hospital executives to allocate dollars for needed personnel.
The place we call home, the hospital, has to repurpose. We all know that. I suppose it’s a spaghetti to the wall kind of reflex–and both reasoned, and rash activity has led to ads in the trades and an all-points bulletin to bring the “population-based” crew aboard. The crew who will live outside our walls.
Some of these folks will last, and some will not. Experiments fail and once good ideas–like telemonitoring at home and branded iPads–may not look so fine in hindsight (it’s the keeping them out of the ER thing). Moreover, as the one-off increase in insured patients levels off, so to will the warm embrace for freshly hired faces. And you can bet, when we get to that point, we will experience consolidation; both in the places where new bodies reside and unfortunately, within our ranks where we ply our craft.
Don’t let the hospital cheer of 2015 get you giddy. The trends of the current period have defined limits related to administrators preparing for an uncertain future along with an upward blip in inpatient traffic. As you know, inpatient capacity has contracted for years. That will not change.