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Health care indicators.

Community hospital statistics

In 1989, the Nation's hospital care bill grew 10 percent to a level of @232.8 billion. Approximately 86 percent of those expenditures were for services delivered in community (short term, acute care) hospitals. Indicators fromthe American Hospital Association panel survey of community hospitals depict accelerating growth in hospital expenditures through the third quarter of 1990. These statistics imply that growth in community hospital expenditures for calendar year 1990 rose approximately 1 to 2 percent faster than that which occurred in 1989.

Expenses of community hospitals rose 11.7 percent between the third quarter of 1989 and the third quarter of 1990, to $ 54.9 billion (Tables 1 and 2). Labor costs for 3.2 million full-time equivalent employees comprised 55 percent of all expenses.

More than three-quarters of all expenses covered services delivered on an inpatient basis. Average inpatient expenses per admission topped $ 5,000 for the first time in the third quarter of 1990, averaging $5,097. This amount represents a 10-percent increase from the same quarter 1 year ago.

The number of admissions fell 0.4 percent between the third quarter of 1989 and 1990, a reversal to the trend of incresing admissions experienced during the prior three quarters. Community hospitals delivered 53 million days of inpatient care during the third quarter of 1990, a decline of 1.8 percent fromthe same period 1 year ago (Figure 1). The average length of stay remained essentially unchanged from the previous quarter at 6.5 days per admission, but is .1 day lower than the same period 1 year ago.

Activity in outpatient departments, including services delivered in clinics and emergency rooms, remained brisk. Number of visits, 83.4 million in the third quarter of 1990, increased 6.7 percent from the third quarter of 1989.

Community hospitals provided the site for 5,496 thousand surgical operations during the third quarter of 1990. Growth in the number of operations performed on both an inpatient and outpatient basis was strong, up 4.0 percent from the same period last year.

Community hospitals operated 920,000 beds in the third quarter of 1990; on average, 62.6 percent of these beds wee occupied. The number of beds in operation continued to decline during the third quarter, down .8 percent from last year (Figure 2). The decline in beds has failed to keep pace with the decline in inpatient days. As a result, the occupancy rate during the third quarter of 1990 was lower than occupancy rates during the third quarter in any of the previous 3 years.

Private health sector: Employment,

hours, and earnings

Levels of employment, hours, and earnings in private (nongovernment) health service establishments are shown in Table 3. These data were drawn from the Bureau of Labor Statistics (BLS) "Establishment" survey of the private nonagricultural sector. An average of 8.2 million persons were employed on a full-time or part-time basis in private health service establishments during quarter ending September 1990. These workers comprise 9 percent of all private employment. Nonsupervisory health care sector employees worked a 32.8-hour week and earned $10.47 an hour. Workers in these establishments worked fewer hours per week while earning more per hour than workers in the private economy as a whole. Whereas health care workers consistently worked fewer hours than the average worker in the private economy, only since the fourth quarter of 1988 have the hourly earnings of health workers surpassed those of the average worker.

Employment in the private health sector grew nearly five times as fast as in the private sector as a whole during the third calendar quarter of 1990: Between the third quarter of 1989 and the third quarte rof 1990, growth in employment in the health care sector accelerated to 7.7 percent while growth in employment in all private establishments slowed to 1.6 percent (Table 4). Within the health sector, employment in physicians' offices showed the strongest growth, up 10.1 percent in the third quarter. This is the first double-digit employment growth seen in physicians' offices in the 1980s. Employment in private hospitals and nursing and personal care facilities continued to grow at rates four times faster than the rest of private economy.

Implied nonsupervisory work-hours and payroll growth, developed from the BLS establishment survey data, are composite measures of business activity. The slowdown of the general economy can be seen in deceleration in growth in work-hours (nonsupervisory employment times average weekly hours) in all private establishments. Despite this slowdown, growth in work-hours in private health service establishments has continued to accelerate

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(Table 5 and Figure 3). Between the third quarter of 1989 and the third quarte of 1990, work-hours in all private establishmens increased 1.3 percent, while work-hours in private health service establishments increased 8.3 percent.

Nonsupervisory payrolls (nonsupervisory work-hours multiplied by average hourly earnings) increased by 14.4 percent for health service establishments in the third quarter of 1990, while payroll in all private establishments increased 5.4 percent (Figure 4). Within the health sector, payroll of physicians' offices grew the fastest, 18.9 percent, and payrolls of private hospitals grew the slowest, 11.9 percent.

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Prices

Consumer prices

Prices paid by consumers of medical care rose 9.3 percent between the third quarter of 1989 and the third quarter of 1990, as measured by the Consumer Price Index (CPI) for all urban consumers. By this measure, overall prices increased by 5.5. percent for the same time period. Since the second quarter of 1981, medical care prices grew faster than the prices of all items (including health); in the first three quarters of 1990, growth in medical care prices accelerated, widening the gap between medical care and all items price inflation (Tables 6 and 7).

The largest element of medical prices is the medical service component of the index. One segment of the service component, hospital and related services, has risen 10.9 percent from the third quarter of 1989 to the third quarter of 1990. This continues the trend of doubl digit inflation for hospital and related services that began seven quarters earlier (Figure 5). In contrast to the accelrating price growth in hospital and related services, prices paid for professional services have increased at a more consistent pace.

The other major component of medical prices is medical care commodities, which had increased 8.3 percent from the third quarter in 1989 to the third quarter of 1990. Prescription drugs, one element of medical care commodities, has consistently shown the largest growth. Growth between the first three quarters of 1989 and 1990 averaged 10.0 percent, higher than the growth exhibited for the same quarters 1 year ago. Total prescription drug expenditures are primarily driven by price. If this price growth continues into the fourth quarter of 1990, then growth in overall expenditures for prescription drugs is expected to accelerate in 1990.

The growth in all items less medical care was 5.3 percent for the period between the third quarter of 1989 and 1990, with energy prices exhibiting strong growth, up 6.8 percent. The full impact of the increases in energy prices, most specifically oil, has yet to be felt, but is expected to have a substantial impact in the last quarter of 1990 as prices are driven by the demand during the cold winter months and the situation in the Persian Gulf.

Background on input price indexes

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

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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. Next, a set of cost categories such as food, fuel, and labor are identified and their 1987 expenditure amounts determined. The proportion or share of total expenditures accounted for by specific spending categories is calculated. These porportions are called cost or expenditure weights. There are 28 expenditure categories in the 1987-based hospital PPS input price index. In the next step, 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 multipled 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 our several years. The HCFA-chosen price proxies are forecasted under contract with DRI/McGraw-Hill (DRI). Each quarter, 1 month after the end of a calendar quarter, DRI updates its macroeconomic forecasts of wages and prices. DRI bases its new forecasts on updated historical information and revised forecast assumptions. New forecasts and estimates are done in February, May, August, and November. Some of the data in Tables 8 through 13 are forecasted and are expected to change as more recent historical data become available and subsequent quarterly forecasts are received.

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). The latest HHA regulatory input price index was published October 18, 1988 (Federal Register), and the latest SNF input price index was published October 2, 1987 (Federal Register).

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Current data

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 11. The HHA input price index is in Tables 12 and 13.

Data highlight

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 includes 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.

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National economic indicators

To put health-related economic trends into perspective, this section shifts focus to discuss national indicators of output, employment, and inflation. During the first three quarters of 1990, the gross national product (GNP) and employment grew at slower rates than in the past and the unemployment rate began to rise. In the medical care sector, however, growth in employment remained strong (Figure 6). Growth in prices paid for medical care goods and services accelerated; the gap in growth between prices paid for medical care and for all items widened (Figure 7). These indicators point to aggregate health care costs continuing their upward climb. As growth in the Nation's output slows, the share of the Nation's resources devoted to health care will increase sharply: The share of GNP devoted to health is expected to grow at an accelerated rate.

Output and income

GNP, the most widely used measured of the Nation's output, was $5.5 trillion during the third calendar quarter of 1990 (seasonally adjusted at annual rates). The growth of "real" GNP *also called "constant dollar" or "price-deflated" GNP) rose to 1.1. percent for the third quarter of 1990. For the fourth consecutive quarter, "real" growth fell below 2 percent. These are the lowest growth rates since the first quarter of 1983.

Personal income rose to $4.7 trillion during the third quarter of 1990, up 6.3 percent from the same quarter of 1989. Disposable personal income (personal income set of taxes) grew 6.1 percent during the same period, reaching a level of $4.0 trillion. The portion of disposable income that was

saved rather than spent (personal saving rate) was 4.1 percent.

Employment, unemployment, and earnings

The slowdown in the real economic growth during the first three quarters of 1990, is beginning to have an effect on the unemployment rate. From the third quarter of 1989 to the second quarter of 1990, the unemployment rate held constant at 5.3 percent. During the third calendar quarter of 1990, the unemployment rate for all workers was 5.6 percent, an increase of 0.3 percentage points from the same period a year ago.

Private nonagricultural workers occupied 93.0 million jobs in the third quarte rof 1990, an increase of 1.6 percent from the third quarter in 1989. In contrast, total jobs held by health service workers expanded 7.7 percent, to 8.2 million, between the third quarter of 1989 and the third quarter of 1990.

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Prices

The GNP fixed-weight price index, the most comprehensive measure of pure price inflation, grew 4.6 percent betwee the third quarters of 1989 and 1990. The GNP implicit price deflator (which reflects cnages in the composition of output as well as in price inflation) rose 4.3 percent between the third quarter of 1989 and that of 1990. A more limited measure of price change covers only the purchases of consumer goods. This measure, the CPI for all items, increased to 5.5 percent between the third quarters of 1989 and 1990 (Tables 14 and 15). While all price measures displayed growth when compared with the previous year, medical care prices increased at almost twice the pace exhibited by the other measures.

The Producer Price Index for finished consumer goods grew 5.4 percent between the third quarter of 1989 and the third quarter of 1990.

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References

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: Medicare program; Schedules of limits of skilled nursing facility inpatient routine service costs; Final rule. Vol. 52, No. 191, 37109. Office of the Federal Register, National Archives and Records Administration. Washington. U.S. Government Printing Office, Oct. 2, 1987.

Federal Register: Medicare program; Schedules of limits of home health agency cost per visit for cost reporting periods beginning on or after July 1, 1988; Notice with comment period. Vol. 53, No. 201, 40771. Office of the Federal Register, National Archives and Records Administration. Washington. U.S. Government Printing Office, Oct. 18, 1988.
COPYRIGHT 1991 U.S. Department of Health and Human Services
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Title Annotation:Community hospital statistics; private health sector: employment, hours, and earnings; prices; national economic indicators
Author:Cowan, Cathy A.; Letsch, Suzanne W.; Levit, Katharine R.; Maple, Brenda T.; Stewart, Madie W.
Publication:Health Care Financing Review
Date:Mar 22, 1991
Words:2631
Previous Article:Medicare expenditures for physician and supplier services, 1970-88.
Next Article:Projections of national health expenditures through the year 2000.
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