Yesterday’s release of construction spending from the U.S. Census Bureau indicates confirms that spending on health facilities is shrinking, as I noted in my entry on last month’s construction report. Total construction spending amounted to about $1 trillion (annualized) in June, of which $40 billion was health care. Health construction spending shrank 0.9 percent from May and grew only 6.3 percent year on year, just over half the rate of growth of all other construction spending. (See Table I.)
This morning’s release of construction spending from the U.S. Census Bureau indicates spending on health facilities actually shrank a little in May, a significant downturn from the previous release (see Table I, below the fold). Total construction spending amounted to about $1 trillion, of which $39 billion was health care. Health construction spending shrank 0.6 percent from April and grew only 3.1 percent year on year. Total construction spending, less health, grew 0.9 percent on the month, and 8.4 percent year on year.
We look at this because other economic data indicate that health spending is consuming more of our prosperity. Low, even shrinking, spending on construction of health facilities may represent the consolidation of hospitals that many fear will lead to increasing prices.
Writing in Health Affairs, Ge Bai and Gerard F. Anderson have highlighted the fifty U.S. hospitals with the most “extreme markups” from what Medicare pays to their list prices (from the hospital chargemaster). The paper, available by subscription, is written up by Olga Khazan in The Atlantic (which you can read online for free):
The study found that, on average, the 50 hospitals with the highest markups charged people 10 times more than what it cost them to provide the treatments in 2012.
Bai and Anderson call for more government interference in hospital pricing:
In response to some comments about the role of health facilities construction in the economy, I’ve decided to add a few lines about today’s construction spending report from the U.S. Census Bureau.
Year on year, total construction spending increased by 4.8 percent through April, to just over one trillion dollars, of which about 40 billion dollars (four percent) was health facilities construction. Health construction spending grew only 2.6 percent, much less than all construction and the 9.2 percent growth in nonresidential non-health construction.
$725 billion of the total construction spending was private, of which a little less than half was residential and a little more than half nonresidential. Private health facilities construction accounted for $31 billion, an increase of 7.5 percent, versus 13.9 percent growth in private nonresidential non-health construction. (Private residential construction collapsed over the twelve months.)
$9 billion of government health construction spending comprised 3.24 percent of all government construction spending ($281 billion), and dropped by 11 percent over the twelve months.
Obamacare induces significant consolidation among providers, which the Federal Trade Commissioner has long recognized can be anti-competitive. State antitrust overseers are also pushing back against this effect:
During the 2008 financial crisis, “too big to fail” became a familiar phrase in the U.S. financial system. Now the U.S. health-care system is heading down the same path with a record number of hospital mergers and acquisitions—95 last year—some creating regional monopolies that, as in all monopolies, will likely result in higher prices from decreased competition.
Some see the dangers. In a rare move, Massachusetts Superior Court Judge Janet Sanders recently blocked Partners HealthCare—Harvard’s affiliated 10-hospital conglomerate and Massachusetts’ largest private employer—from acquiring three competitor hospitals.
(Marty Makary, “The Obamacare Effect: Hospital Monopolies,” Wall Street Journal, April 19, 2015)
Guess what? Those safety-net hospitals in states that did not expand Medicaid, which were pleading that they would go bust unless that welfare program grew, are doing just fine:
Hospitals that treat many poor and uninsured patients were expected to face tough financial times in states that did not expand Medicaid under the federal law known as Obamacare.
That’s because they would get less Medicare and Medicaid funding under the Affordable Care Act, while still having to provide high levels of charity care.
But in some of the largest states that did not expand Medicaid, many safety-net hospitals fared pretty well last year — even better than in 2013 in many cases, according to their financial documents. KHN looked at the performance of about a dozen such hospitals in Florida, Texas, Georgia, Tennessee, South Carolina, Virginia and Kansas, which released their 2014 financial results. (Phil Galewitz, MedCityNews)
Last Friday’s employment report demonstrated once again that Obamacare is not having the effect that the health services industry overall hoped for: Employment in health care is increasing at pretty much the same pace as in the rest of the economy. There is no evidence of an Obamacare jobs bump.
As shown in Table 1 and Table 2, the monthly increase in health jobs for December was 0.23 percent (34 thousand jobs), which is slightly greater than the 0.17 percent increase in non-health, nonfarm payroll. However, those figures are just reversed from November. In the twelve months since December 2013, the rate of growth in health jobs has been exactly the same as non-health jobs.
The evidence that Medicaid expansion increases use of hospitals’ emergency departments is coming fast and thick. Hospital executives are longer afraid to admit it, and have given up the pretense that Medicaid increases timely, quality, primary care. Here’s one form Fort Smith, Arkansas:
Almost a year after the first health insurance enrollment under the Affordable Care Act, local hospitals Sparks Regional Medical Center and Mercy Fort Smith have seen an uptick in emergency room visits. Shelly Cordum, nursing chief executive for Sparks Regional Medical Center in Fort Smith, says the Sparks emergency department saw 6,700 patients in July. The trend is not expected to decline either. “The Medicaid expansion and the health care option certainly has spurred this influx, without a doubt,” Cordum said. “It’s people from all walks of life. They’re coming in with all different kinds of medical problems, and they enter the hospital through the ER because many don’t have a primary care physician and they are very sick.” (Fort Smith Times Record)
NPR had a feature on hospitals’ using online services to allow frequent flyers to book appointments at the ED:
Three times in one week, 34-year-old Michael Granillo returned to the emergency room of the Northridge Hospital Medical Center in Southern California, seeking relief from intense back pain. Each time, Granillo waited a little while and then left the ER without ever being seen by a doctor.