PwC: Healthcare Spending Suffering From Recession "Hangover"

The net growth rate of U.S. healthcare spending is expected to increase only 4.5 percent in 2014, smaller than previous years, as the system and providers continue to suffer from a recession "hangover," according to a report from PwC.

When the financial system collapsed in 2008, creating the recession, the healthcare sector saw many immediate and long-term effects. PwC analysts said the recession actually created a "new normal" in healthcare spending: Because patients have to bear more financial responsibility of their healthcare — via loss of health coverage, higher premiums, the rise of high-deductible health plans and other factors — they delay some procedures, especially elective surgeries. For-profit hospital operators said this has negatively affected their earnings so far this year.

However, PwC analysts noted that the slowdown in healthcare spending has helped hospitals continue moving care out of their facilities and into physician offices and other ambulatory settings. "The new care venues are not only consumer-friendly, but also less expensive," the report reads. "Gaining in popularity, these will slow the rise in medical costs next year."

Other factors pushing down the spending growth of medical services are direct employer-provider networks and bundled payment agreements, CMS' readmission penalties and HDHPs.

PwC researchers said despite the depressed spending growth rate, consolidation in the healthcare industry may inflate medical costs in 2014 and beyond. Healthcare mergers have increased 50 percent since 2009, and PwC's report said "higher prices are sure to follow in some markets." Last year, the Robert Wood Johnson Foundation released a study saying when hospitals merge in already concentrated markets, price increases can often exceed 20 percent.

More Articles on Healthcare Spending:
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What's Really Behind the Healthcare Spending Disparity in Massachusetts?

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