overview of the u.s. health care system updated: february 2005
TRANSCRIPT
OVERVIEW OF THE U.S. HEALTH CARE SYSTEM
Updated: February 2005
Hospital Care 30.7%
Physician Services22.0%
Other Professional
10.3%
PrescriptionDrugs10.7%
Nursing Home6.6%
Other19.7%
Total = $1.7 Trillion
The U.S. spends about a third of its health care dollar on hospital care.
Source: Centers for Medicare and Medicaid
Distribution of U.S. Health Care Expenditures by Category2003
National Health Expendituresas a Percentage of Gross Domestic Product
1980 - 2003
Source: Centers for Medicare & Medicaid Services, Office of the Actuary
8.8
%
9.1
%
9.9
%
10.0
%
9.9
%
10.1
%
10.2
%
10.5
%
10.9
%
11.4
%
12.0
%
12.7
%
13.0
%
13.3
%
13.3
%
13.4
%
13.3
%
13.2
%
13.2
%
13.2
%
13.3
%
14.1
%
14.9
%
15.3
%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Health care spending represents about 15 percent of GDP.
Policy-makers are concerned about growth in health care spending.
Source: Centers for Medicare & Medicaid Services, Office of the Actuary
Percent Growth in National Health Care Spending 1990-2003
16.0
%
12.6
%
10.1
%
10.4
%
9.4%
7.1%
8.9%
12.1
%
11.6
%
11.0
%
9.5%
8.6%
8.5%
5.5%
5.7%
5.0%
5.1%
5.3% 6.
2% 7.2%
8.9% 9.3%
7.7%
0%
5%
10%
15%
20%
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
13.2%
10.7%
9.5%
8.5%
5.0%4.2% 4.0%
6.5%
7.0%
0%
2%
4%
6%
8%
10%
12%
14%
Percent Change in National Expenditures for Health Services and Supplies(1) by Category
2002 - 2003
Source: Centers for Medicare & Medicaid Services, Office of the Actuary
(1) Excludes medical research and medical facilities construction(2) “Other” includes government public health activities and other personal health care(3) “Other professional” includes dental and other non-physician professional services
Prescription Drugs
Other (2)
Physician Services
OtherProfes-sional (3)
HospitalCare
Nursing HomeCare
Home Health
Care
OtherMedical Durables
and Non Durables
Admin.and NetCost ofPriv.
Health Insurance
7.6%All Health Services &Supplies
Growth in hospital spending is not the driving factor, but has been gaining attention.
Overall private payers fund about a third of health care spending.
Consumer Out of Pocket 13.7%
Private Insurance 35.8%
Other Private 4.8%
Medicare 17.0%
Medicaid 16.0%
Other Government12.7%
Total = $1.7 Trillion
Source: Centers for Medicare and Medicaid
Distribution of U.S. Health Care Expenditures by Payer Source2003
Private sector coverage is predominantly in managed care plans.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1988 1993 1996 1998 1999 2000 2001 2002 2003 2004
Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2002 Annual Survey
(1) Point-of-service plans not separately identified
Distribution of Employer-sponsored Health Insurance Enrollment by Type of
Plan1988 - 2004
Conventional
PPO
HMO
POS*
Premium growth is in the double-digits for U.S. employers.
12.0%
8.5%
0.8%
3.7%
5.3%
8.2%
10.9%
12.9%
13.9%
11.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1988 1993 1996 1998 1999 2000 2001 2002 2003 2004
Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 1999, 2000, 2001, and 2002 Annual Surveys
Annual Percent Change in Health Insurance Premiums1988 - 2004
For hospitals, government accounts for about half of costs.
Private Insurance 37.5%
Uncompensated Care 5.5%
Medicare 38.5%
Medicaid 14.3%
Other Government1.6%
Total = $450.1 BillionSource: AHA Annual Survey, 2001
Acute Care Hospital Costs by Payer2003
Non-Patient Care 2.6%
CHALLENGES FACING HOSPITALS
The hospital field faces many challenges.
• Payment shortfalls for Medicare and Medicaid
• Worker shortages• Rising demand and constrained capacity• Regulatory burden• Rapidly rising costs• Decreased access to capital
The majority of hospitals lose money on Medicare and Medicaid.
30%
59%
61%
Hospitals with NegativeTotal Margins In 2003
Hospitals with NegativeMedicaid Margins in
2003
Hospitals with NegativeTotal Medicare Margins
In 2003
Source: MedPAC and AHA Annual Survey Data
When the public sector doesn’t pay its share, the private sector makes up the difference.
75%
100%
125%
150%
Aggregate Hospital Payment-to-cost Ratiosfor Private Payers, Medicare and Medicaid
1980 - 2003
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 - 2001 for community hospitals
Private Payer
Medicare
Medicaid
LARGE NUMBERS OF UNINSURED
The economic slowdown reversed recent progress in coverage.
Number and Percent Uninsured1985 - 2003
0
5
10
15
20
25
30
35
40
45
50
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 030%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Source: US Census Bureau
Nu
mb
er
of
Un
ins
ure
d
in M
illi
on
s
Pe
rce
nt
of
To
tal
Po
pu
lati
on
Number Percent
U.S. hospitals provide about $25 billion in uncompensated care.
$18.5
$20.7$21.6 $21.5
$22.3
$24.9
$19.0
1997 1998 1999 2000 2001 2002 2003
Aggregate Hospital Uncompensated Care Costs(in billions)1997-2003
Source: AHA Annual Survey
WORKER SHORTAGES
Vacancy Rates for Selected Hospital Personnel 2003
Hospitals face severe workforce shortages.
7.0% 6.8% 6.6% 6.5%
4.3%
8.4%
RegisteredNurses
LPNs Pharmacists ImagingTechnicians
NursingAssistants
LaboratoryTechnicians
Source: 2004 AHA Survey of Hospital Leaders
These workforce shortages are impacting patient care.
4%
8%
11%
17%
17%
18%
23%
28%
34%
40%ED Overcrowding
Diverted ED Patients
Reduced Number of Staffed Beds
Increased Wait Times to Surgery
Discontinued Programs/ Reduced
Service Hours
Delayed Discharge/ Increased Length of Stay
Cancelled Surgeries
Curtailed Acquisition of New
TechnologyCurtailed Plans for Facility Expansion
Typ
e o
f Im
pa
ct
Source: 2004 AHA Survey of Hospital Leaders
Percent of Hospitals Reporting Service Impacts of Workforce Shortage
2003
Decreased Patient Satisfaction
Forecast of Total RN FTEs vs. Requirements 2001-2020
Shortageof 800,000
nurses in 2020
Supply
Demand
The labor shortage will reach crisis proportions unless action is taken.
Source: Bureau of Health Professions, National Center for Health Workforce Analysis, Projected Supply, Demand, and Shortages of Registered Nurses: 2000-2020, July 2002
1,500
1,700
1,900
2,100
2,300
2,500
2,700
2,900
2000 2005 2010 2015 2020
FTEs
(in
tho
usan
ds)
RISING DEMAND AND CONSTRAINED CAPACITY
Demand for inpatient hospital services is increasing…
Inpatient Days and Admissions 1980 - 2003
27
28
29
30
31
32
33
34
35
36
37
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 030
50
100
150
200
250
300
Inpatient Days
Inpatient Admissions
Mil
lio
ns
of
Ad
mis
sio
ns
Mil
lio
ns
of
Da
ys
Source: AHA Annual Survey
...as is demand for outpatient care.
Total Hospital Outpatient Visitsin Community Hospitals
1980 - 2003
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 - 2001 for community hospitals
Mil
lio
ns
0
100
200
300
400
500
600
80 81 8283 8485 86 8788 89 9091 9293 94 9596 97 9899 0001 02 03
Rising ED volume has been a special concern.
0
20
40
60
80
100
120
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
ED
Vis
its (m
illio
ns)
Number of ED VisitsAll Community Hospitals, All Payers
1990 - 2003
Source: 1990-2001 from AHA Annual Survey
24%
23%
34%
18%
29%
24%
21%
43%
12%
35%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
All Hospitals
Non-teaching Hospitals
Teaching Hospitals
Rural Hospitals
Urban Hospitals
ED is "At" Capacity ED is "Over" Capacity
Most EDs report that they are “at” or “over” capacity.
Percent of Hospitals Reporting ED Capacity Issues by Type of Hospital
2004
Source: AHA 2004 Survey of Hospital Leaders
64%
30%
77%
44%
48%
A majority of urban and teaching hospitals experience time on ED diversion.
Percent of Hospitals Reporting Time on Diversionin Last 12 Months
46%
43%
68%
20%
69%
All Hospitals
Non-teaching
Teaching
Rural
Urban
Source: AHA 2004 Survey of Hospital Leaders
Note: diversion is not an option for most rural hospitals which are their communities’ only provider
5%
9%
19%
20%
39%
Lack of SpecialtyPhysician Coverage
Staff Shortages
ED Overcrowded
Lack of General AcuteCare Beds
Lack of Critical CareBeds
Lack of staffed critical care beds is the is the #1 reason for ED diversion.
Percent of Hospitals Citing Factor as Number One Reason for Ambulance Diversion
January 2004
Source: AHA 2004 Survey of Hospital Leaders
REGULATORY BURDEN
Government regulation of health care is cumbersome and confusing…
March 13, 2001
WHO REGULATES HOSPITALS
IRS EPA FTC FCC
FBI
HHS/HRSA HHS/NIOSH JCAHO NRC DOL
SEC
OPOs
FAA
DEA
Regional Home Health Intermediaries
DME Regional Contractors
Treasury
DOJ
OSHA
DOT
FDA
Regional Offices
Intermediaries Carriers PROs
PRRB
Medicare Integrity Program Contractors
Congress
Federal Circuit Courts Supreme Court
Departmental Appeals
OIG
State
Survey & Certification
Courts
Attorneys General
Medicaid
Health Boards
Medical Boards
Local Governments
Licensure
Hospitals
Centers forMedicare &
Medicaid Services
Homeland Security
…creating a paperwork burden that takes caregivers away from the bedside.
INCREASING COSTS
4-13
4.4% 4.3%
3.4%
0%
1%
2%
3%
4%
5%
6%
All Private ServiceIndustries
All Health Services Hospitals
Percent Change in Employment Cost Index forPrivate Service Industries
September 2004
Source: Bureau of Labor Statistics, Employment Cost Index, 12 Months Ending September, 2004; www.bls.gov
Hospitals face labor cost increases over 25% higher than service industries as a whole.
$1.9
$1.6
$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
$2.2
2003 2004 2005 Projected
U.S. Sales of Taxus Drug Eluting Stents (in billions of dollars)
Source: Boston Scientific. Note Taxus represents an estimated 65% of U.S. drug eluting stent sales.
Bil
lio
ns
of
Do
llar
s
Advances in medicine offer new possibilities, but add billions to the nation’s cost of caring.
The cost to keep up with advanced technology is staggering.
“Traditional” Contemporary Next Round
Technology Technology Technology
X-Ray Machine
$175,000
Open Surgery Instrument Set
$10,000
Cardiac Balloon Catheter
$500
Scalpel
$20
CAT Scanner
$1,000,000
Laparoscopic Surgery Set
$15,000
Stent
$2,300
Electrocautery
$12,000
CT Functional
Imaging with PET
$2,300,000
Robotic Surgical Device
$1,000,000
Treated Stent
$5,000
Harmonic Scalpel
$30,000
© 2002 University HealthSystem Consortium
Percent of Hospitals in Crisis States* by Rate of Growth in Professional Liability Expense over Past Two Years
Hospitals face skyrocketing costs for medical liability coverage.
*Crisis states as identified by the American Medical Association as of March of 2004 include: PA, WV, NV, MS, WA, OR, TX, AR, MO, GA, FL, IL, NC, KY, OH, NY, CT, NJ, WY. Some of these states recently have passed legislative reforms that have not been tested in the courts.
Source: AHA 2004 Survey of Hospital Leaders
Increase of Double or
More20.3%
50 to 99.9%Increase
25.6%
Less than 10%Increase24.0%
10- 49.9%Increase
30.1%
CONSTRAINED CAPITAL
4-12
Ye
ars
7.9 8 8.2 8.4 8.6 8.8 8.9 9.2 9.3 9.2 9.4 9.6 9.8 9.8
0
2
4
6
8
10
12
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Median Average Age of Plant1990 - 2003
Source: CHIPS: The 1994 Almanac of Hospital and Financial Operating Indicators, The 1996-7 Almanac of Hospital and Operating Indicators, and 1998-2003 data from Ingenix: Almanac of Hospital Financial and Operating Indicators 2005
The average age of plant for hospitals is increasing.
4-11
19
6369
61
41
12 10 10 1121
3534
555962
28
73
32
55
26 2837
61
45
93 94 95 96 97 98 99 00 01 02 03 04
Number of Bond Rating Upgrades and Downgrades of Non-profit Hospitals
1993 - 2004
Source: Standard & Poor’s, 2005
Upgrades
Downgrades
More downgrades than upgrades mean hospitals are finding access to capital difficult.
DISCUSSION