Hospitals, drug costs and technology will increase healthcare costs in 2015

Despite the focus on making healthcare more affordable, a new study suggests that the cost to treat patients could escalate starting in 2015.

An estimated 6.8% rise in costs is due to more physicians becoming hospital-employed, an increased use of technology and higher-cost drugs, and an overall economic upswing, according to PricewaterhouseCoopers’ Health Research Institute (HRI) Medical Cost Trends report. After factoring in savings, HRI estimates the net growth rate will be 4.8% in 2015.

Hospital systems buying physician practices will “immediately escalate physician charges to the higher hospital rate, which will likely trigger a rise in spending next year,” the HRI study found. For example, administering oncology drugs in a hospital can be more than twice as expensive than in a physician office, according to the report.

Drug treatment for hepatitis C will increase by 209% by 2015 due to new treatments that last 12 weeks and cost $1,000 per pill. “Yet long-term savings for chronic treatments, liver transplants, and lost productivity may ultimately offset the cost of these specialty drugs for the most seriously ill patients,” the survey’s authors say.

Purchasing and integrating healthcare technology to meet government regulations will also increase the overall costs of healthcare. HRI estimates that end-to-end integration of electronic health records systems can increase operating costs by 2% for health systems. The costs increase when coupled with the fact that health systems are continuing to buy more practices and integrate new technologies. “Health systems that defer technology integration are left with incompatible computer systems, which lead to inefficiencies and make it difficult to see a complete portrait of patient data,” the study’s authors say.

The study also identifies factors that would provide some healthcare savings. Team-based care, or “systemness,” will continue to reduce redundancy and lower operating costs. Consumers who purchase high-deductible plans tend to be more cost conscious, use fewer prescription medicines, and visit doctors less often. Finally, as the industry begins to tie financial incentives to value-based care and patient satisfaction, researchers say physicians and health systems are becoming more efficient.

“Savings that come from standardization can help position health businesses for the value-driven future. But real success and profitability will go to the insurers, drug makers, and healthcare providers that deliver highly personalized customer experiences at a competitive price,” the survey’s authors say.

The cost to treat patients has been shrinking for the past five years, after ballooning double digits in the 1990s and early 2000s. “At first glance, the health sector appears to be reverting to historical patterns of bouncing back as the nation recovers from the economic doldrums,” the study’s authors say. “The improving economy demonstrates that structural changes in the health sector have taken the steam out of run-away cost inflation. The challenge for industry executives is to continue to control spending even in the face of countervailing winds such as expensive new innovations, improved consumer confidence, and an aging society that requires more medical care and services.”