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Health care indicators.

This regular feature of the journal includes a discussion of each of the following four topics: community hospital statistics; employment, hours, and earnings in the private health sector; health care prices; and national economic indicators. These statistics are valuable in their own right for understanding the relationship between the health care sector and the overall economy. In addition, they allow us to anticipate the direction and magnitude of health care cost changes prior to the availability of more comprehensive data.


This article presents statistics on health care utilization, prices, expenses, employment, and work hours as well as on national economic activity. Some of these statistics are based on sample surveys conducted monthly or quarterly by government agencies or private organizations, and are available 1 to 3 months after the completion of the period. They provide the first glimpse at changes occurring within the general economy and the health care sector.

The accompanying tables report selected quarterly statistics for 1989 through the second quarter of 1992, and the calendar year aggregation of quarterly information in the past 3 years. Additional tables show change from the same period 1 year earlier. For quarterly information, this calculation permits analysis of quarterly data to focus on the direction and magnitude of changes, without interference introduced by seasonal fluctuations.

In the national health accounts, indicators such as these play an important role in the estimation of the latest historical year of health care expenditures. Information that is more comprehensive tends to lag behind the close of a calendar year by 9 to 12 months or more. Therefore, we rely extensively on indicators such as these to anticipate and predict changes in health care sector expenditures for the most recent year. Other indicators help to identify specific reasons (e.g., increases in price inflation or declines in utilization) for expenditure change.

In the following sections, we will identify important indicators of health care and national economic activity and their sources. We then describe what these indicators tell us about general economic and health sector activity during the most recent quarter.

Community hospital statistics

Since 1963, the American Hospital Association, in cooperation with member hospitals, has collected data on the operation of community hospitals through its National Hospital Panel Survey. Community hospitals, which comprised over 80 percent of all hospital facilities in the United States in 1990, include all non-Federal, short-term general, and other special hospitals open to the public. They exclude hospital units of institutions; psychiatric facilities; tuberculosis, other respiratory, and chronic disease hospitals; institutions for the mentally retarded; and alcohol and chemical dependency hospitals.

The survey samples approximately one-third of all U.S. community hospitals. The sample is designed to produce estimates of community hospitals indicators by bed size and region (American Hospital Association, no date). In Tables 1 and 2, statistics covering expense, utilization, beds, and personnel depict trends in the operation of community hospitals annually from 1989 through 1991 and for selected quarters from 1989 through 1992.


For purposes of national health expenditures (NHE), the survey statistics on revenues (not shown on Table 1) are analyzed in estimating the growth in the largest component of health care costs - community hospital expenditures. This one segment of NHE accounted for 33 percent of all health spending in 1991 (Letsch, Levit, and Lazenby, 1992). The survey also identifies important factors influencing expenditure growth patterns, such as changes in the riumber of beds in operation, number of admissions, length of stay, use of outpatient facilities, and number of surgeries.

Private health sector: Employment,

hours, and earnings

The U.S. Bureau of Labor Statistics (BLS) collects monthly information on employment for all workers, and earnings and work hours for non-supervisory workers in a sample of 350,000 establishments. Data are collected through cooperative agreements with State agencies that also use this information to create State and local area statistics. The survey is designed to collect industry-specific information on wage and salary jobs in non-agricultural industries. It excludes statistics on self-employed persons and on those employed in the military (U.S. Department of Labor, 1991).

Employment in this survey is defined as number of jobs. Persons holding multiple jobs would be counted multiple times. Approximately 5 percent of the population hold more than one job at any point in time. (Other surveys that are household based, such as the Current Population Survey [CPS], also record employment. In the CPS, however, each person's employment status is counted only once, as either employed, unemployed, or not in the labor force.) Once each year, monthly establishment-based employment statistics are adjusted to benchmarks created from annual establishment census information, resulting in revisions to previously published employment estimates.

Tables 3 and 4 present statistics on employment, average hourly earnings, and average weekly hours in private (non-government) health service establishments. Similar statistics for the all private non-agricultural sector, included on these tables, provide a basis for comparing the economy as a whole with the health sector in employment, earnings, and work hours. Table 5 summarizes business activity in the health sector and the overall economy by measuring change in the implied non-supervisory work hours and payroll. Implied work hours are the product of the number of non-supervisory employees and average weekly hours. Implied non-supervisory payrolls are calculated by multiplying implied work hours by average hourly earnings.


For purposes of NHE, changes in work hours by industry combined with changes in prices (discussed in a later section) can be used to gauge the direction and magnitude of expenditure change in specific industries. We use these composite indicators in the estimation of growth in physician and dental expenditures for the most recent period. We study the historical relationship of changes in this indicator to changes in expenditures and estimate this relationship for the most recent period.


Consumer prices

BLS publishes monthly information on changes in prices paid by consumers for a fixed market basket of goods and services. Tables 6 and 7 present information on the Consumer Price Index (CPI) for all urban consumers that measures changes in prices faced by 80 percent of the non-institutionalized population in the United States. (The more restrictive wage earner CPI gauges prices faced by wage earners and clerical workers. These workers account for 32 percent of the non-institutionalized population [U.S. Department of Labor, 1990].)


The index reflects changes in prices charged for the same quality and quantity of goods or services purchased in the base period. For most items, the base period of 1982-84 is used to define the share of consumer expenditures purchasing specific services and products. Those shares or weights remain constant in all years, even though consumption patterns of the household may change over time. This type of index is called a fixed weight or Laspeyres index.

CPIs for health care goods and services depict price changes for out-of-pocket expenditures made by consumers directly. The composite CPI for medical care weights together product-or service-specific CPIs in proportion to household out-of-pocket expenditures for these items. For example, the composite medical care CPI measures inflation for the 3 percent of hospital expenditures that are made out-of-pocket by consumers; the remaining 97 percent of the costs of hospital care paid by private health insurers, Medicare, Medicaid, and other payers are not weighted into the CPI for medical care. In addition, some medical care sector indexes measure changes in list or charged prices, rather than the prices actually received by providers after discounts are deducted. In several health care areas, received or transaction prices are difficult to capture, although BLS is making advances in this area.

In the NHE, a combination of CPIs for selected medical care items and input price indexes for hospitals and nursing homes are used as measures of inflation for the health industry. The indexes are used to develop a personal health care fixed-weight price index to depict price changes affecting the entire health care industry more accurately than does the overall CPI medical care index (Letsch, Levit, and Lazenby, 1992).

Background on input price indexes

In 1979, the Health Care Financing Administration (HCFA) developed the hospital input price index to measure the pure price changes associated with expenditure changes for hospital services. In the early 1980s, the skilled nursing facility(SNF) and home health agency (HHA) input price indexes, often referred to as "market baskets," were developed to price a consistent set of goods and services over time. They have played an important role in helping to set payment percent increases and to understand the contribution of input price increases to growing health expenditures.

The input price indexes, or market baskets, are Laspeyres or fixed-weight indexes that are constructed in two steps. First, a base period is selected. For example, for the prospective payment system (PPS) hospital input price index, the base period is 1987. Cost categories, such as food, fuel, and labor, are identified and their 1987 expenditure amounts determined. The proportion or share of total expenditures included in specific spending categories is calculated. These proportions are called cost or expenditure weights. There are 28 expenditure categories in the 1987-based PPS input price index.

Second, a price proxy is selected to match each expenditure category. The purpose of the price proxy is to measure the rate of price increase of the goods or services in that expenditure category. The price proxy index for each spending category is multiplied by the expenditure weight for the category. The sum of these products (weights multiplied by the price index) over all cost categories yields the composite input price index for any given time period, usually a fiscal year or a calendar year. The percent change in the input price index is an estimate of price change over time for a fixed quantity of goods and services purchased by a provider.

The input price indexes are estimated on a historical basis and forecasted out several years. The HCFA-chosen price proxies are forecasted under contract with Data Resources, Inc./McGraw Hill (DRI). Following every calendar year quarter, in March, June, September, and December, DRI updates its macroeconomic forecasts of wages and prices based on updated historical information and revised forecast assumptions.

The methodology and price proxy definitions used in the input price indexes are described in the Federal Register notices that accompany the revisions of the PPS, HHA, and SNF cost limits. A description of the current PPS input price index was published September 4, 1990 (Federal Register, 1990). The latest HHA regulatory input price index was published July 1, 1992 (Federal Register, 1992a), and the latest SNF input price index was published October 7, 1992 (Federal Register, 1992b).

Each input price index is presented in two tables: The first is a percent-change table, and the second provides the actual index numbers from which the percentages were computed. The hospital input price index for PPS is in Tables 8 and 9. The SNF input price index is in Tables 10 and I 1. The HHA input price index is in Tables 12 and 13.


The PPS input price index has been revised, and a new base year of 1987 has been selected (Tables 8 and 9). Effective October 1, 1990, the new PPS input price index was used to set the fiscal year 1991 market basket value for the update of the prospective payment rates. This revision also included changes in certain variables used for price proxies. Periodically, the various input price indexes are revised so that the cost weights will reflect changes in the mix of goods and services that providers purchase.

National economic indicators

National economic indicators provide a context for understanding health-specific indicators and how change in the health sector relates to change in the economy as a whole. Tables 14 and 15 present national indicators of output, employment, and inflation (U.S. Department of Commerce, 1992).


Gross domestic product (GDP) measures the U.S. economy as the value of output produced within the geographic boundaries of the United States by U.S. or foreign citizens or companies. Constant dollar or "real" GDP removes the effects of prices from the valuation of goods and services produced, so that the growth of real GDP reflects changes in the "physical" output of the economy.

Second quarter indicators

As the rest of the economy is showing signs of a slow recovery from the recession that began in the early part of 1990, the health care industry is exhibiting a slowdown. Utilization in hospitals is down, and growth in the employment and payroll for overall health care industry is decelerating. Prices paid for medical care have been stabilized but are still growing at more than twice the rate of the CPI for all items.

Admissions, inpatient days, and adult length of stays for community hospitals have dropped in the second quarter in 1992 when compared with the second quarter of 1991. The net effect of this downturn in utilization measures is a deceleration in operating and inpatient expense growth (Figure 1).

In the fourth quarter of 1991 and the first quarter of 1992, the number of admissions rose slightly. This was primarily because of an increase in utilization by the population 65 years of age or over, who were adversely affected by the 1991-92 flu season. In the most recent quarter, the admissions for the population 65 years of age or over continued to grow, while the admissions for the population under 65 years of age continued to decline.

Other measures of hospital utilization, surgical operations and outpatient visits, had growth rates that decelerated in the second quarter of 1992 (Figure 2). The number of beds and adult occupancy rates have decreased.

Employment in all private non-agricultural establishments grew slightly in the second quarter of 1992, up 0.1 percent. This is the first quarter of positive growth since the first quarter of 1991. At the same time, total employment in health care establishments continued to grow, but at a decelerated pace, up 3.7 percent (Figure 3).

Growth in average hourly earnings in total health care establishments has decelerated dramatically since the second quarter of 1991. By the second quarter of 1992, growth had decelerated to 3.6 percent, down from 5.8 percent 1 year earlier. During that timeframe, hospitals' average hourly earnings decelerated from 6.5 percent to 3.8 percent.

Payroll for private health service establishments decelerated over two points in the second quarter of 1992 after exhibiting stable growth since the second quarter of 1991. From the second quarter of 1991 to the second quarter of 1992, the growth in payroll for offices and clinics of medical doctors dropped 6.0 percentage points (Figure 4). The primary reason is due to the deceleration in the growth of average hourly earnings previously discussed. At the same time, growth in payroll in all private non-agricultural establishments accelerated approximately 3 percentage points (from 0.2 percent to 3.1 percent). Growth in work hours exhibited the same trend, decelerating in private health service establishments while accelerating in all private non-agricultural establishments.

The CPI for all items displayed flat growth in the second quarter of 1992, up 3.1 percent from 1 year earlier. Growth of medical care prices has been decelerating slightly for more than three quarters; however, it still is more than twice the growth of the CPI for all items (Figure 5).

Price growth for medical care services showed a slight decrease caused by a deceleration in the growth of insurance prices. Growth in medical care commodity prices decelerated with prescription drugs slowing down 0.8 percentage point in the second quarter (Figure 6).

Price growth for prescription drugs decelerated because of forces inside and outside of the industry. Manufacturers are holding down prices in response to increased pressure from consumer and political groups for price constraints. Retail drug outlets are constraining price growth because of increased competition. An increasing number of outlets are selling prescription drugs at discount prices, causing all outlets to re-evaluate their pricing strategies.

Real GDP grew slowly in the second quarter of 1992, the third quarter of positive growth, when compared with the same period from the previous year. The unemployment rate continued to rise, a trend that started in the fourth quarter of 1989 (Figure 7). At the same time, total employment showed the first positive growth since the third quarter of 1990 as a result of more individuals participating in the labor force during the second quarter of 1992.

The combination of the hospital utilization, employment and earnings, and prices plays a large part in determining the growth of the national health expenditures and its relationship to the general economy. In the second quarter of 1992, the overall economy stabilized and growth in health care industry indicators continued to slow down. Decreasing utilization in hospitals has a dampening effect on hospital revenues. All areas of health care are showing a deceleration in the employment and hourly earnings and, consequently, payrolls. Price growth for medical care is decelerating. Should these current trends continue over the next two quarters, then the growth of NHE will be slower than the 11.4-percent growth in 1991 (Letsch, Levit, and Lazenby, 1992).


American Hospital Association: National Hospital Panel Survey. Unpublished. Chicago. American Hospital Association. No date. Federal Register: Medicare Program; Changes to the Inpatient Hospital Prospective Payment System and Fiscal Year 1991 Rates; Final Rule. Vol. 55, No. 170, 36043-36050 and 36169-36173. Office of the Federal Register, National Archives and Records Administration. Washington. U.S. Government Printing Office, Sept. 4, 1990. Federal Register: Skilled Nursing Facility. Vol. 57, No. 195, 46177-46189. Office of the Federal Register, National Archives and Records Administration. Washington. U.S. Government Printing Office, Oct. 7, 1992a. Federal Register: Medicare Program; Schedules of Limits of Skilled Nursing Facility Inpatient Routine Service Costs; Final Rule. Vol. 57, No. 195, 46177-46189. Office of the Federal Register, National Archives and Records Administration. Washington. U.S. Government Printing Office. Oct. 7, 1992b. Letsch, S.W., Levit, K.R., and Lazenby, H.C.: National health expenditures, 1991. Health Care Financing Review 14(2). HCFA Pub. No. 03335. Office of Research and Demonstrations. Health Care Financing Administration. Washington. U.S. Government Printing Office, Winter 1992. U.S. Department of Commerce: National Income and Product Accounts. Survey of Current Business. Vol. 72, No. 3. Bureau of Economic Analysis. Washington. U.S. Government Printing Office, 1992. U. S. Department of Labor: Employment and Earnings. Vol. 38, No. 6. Bureau of Labor Statistics. Washington. U.S. Government Printing Office, June 1991. U.S. Department of Labor: Notes on Current Labor Statistics: Price Data. Monthly Labor Review. Vol. 113, No. 11. Bureau of Labor Statistics. Washington. U. S. Government Printing Office, Nov. 1990.
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Author:Donham, Carolyn S.; Maple, Brenda T.; Cowan, Cathy A.
Publication:Health Care Financing Review
Date:Dec 22, 1992
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