The 2017 AHA Environmental Scan: Economy and Finance

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  • Moody’s Investors Service notes that increasing supply costs and the possibility of wage pressure from the improving economy will add to margin pressure. Consolidation among health insurers will increase their scale and bargaining power, which could ultimately reduce reimbursement rates for hospitals.1
  • Fitch Ratings has maintained its stable ratings outlook for the nonprofit hospital sector in 2016. However, Fitch also has maintained its overall negative sector outlook, observing that it “will be increasingly challenged by growing consumerism, meager rate increases and a shifting of risk from payers (particularly Medicare) to providers through the expansion of value-based/risk-based contracting. The slower than anticipated impacts of [the Affordable Care Act] have not diminished sector risks, only deferred them.”2
  • National health expenditures are projected to reach $3.35 trillion, or $10,345 per capita, in 2016, with hospital care accounting for 32 percent of the expense. The annual increase of 4.8 percent is lower than the forecast for the rest of the decade. A stronger economy, faster growth in medical prices and an aging population are driving the trend. By 2025, government at all levels will account for 47 percent of health care spending.3
  • Private health care spending continues to increase faster than the economy and is now at 17.4 percent of gross domestic product. The number of employers offering high-deductible health plans grew almost 300 percent since 2009. Over the same time period, average in-network deductibles and out-of-network deductibles increased by roughly $500 and $1,000, respectively.4
  • Overall drug spending increased 12.2 percent last year, the highest rate of increase in more than a decade, driven not just by new branded entrants but also by generics. In fact, an analysis by market firm Connecture showed more than 3,500 generic drugs at least doubled in price from 2008 to 2015, with nearly 400 up more than 1,000 percent.5

2017 AHA Environmental Scan

Download the complete 2017 AHA Environmental Scan PDF sponsored by B. E. Smith.

Resources

  1. “Moody’s: U.S. For-Profit Hospital Earnings Growth Will be Tempered by Margin Challenges,” Moody’s Investors Service, February 2016.
  2. “Fitch Issues 2016 Forecast for Non-Profit Hospitals,” by Ron Shinkman, Fierce Health Finance, Dec. 3, 2015.
  3. “National Health Expenditure Projections, 2015–25: Economy, Prices, and Aging Expected to Shape Spending and Enrollment,” by Sean P. Keehan et al., Health Affairs, August 2016 35(8):1522–31.
  4. “Medical Cost Trend: Behind the Numbers 2016,” Health Research Institute, PricewaterhouseCoopers, June 2015.
  5. “Six Big Trends to Watch in Health Care for 2016,” by Susan DeVore, Health Affairs blog, Dec. 30, 2015.