News Column

Fitch: U.S. Hospital Charge Growth Will Remain Slow

June 9, 2014



CHICAGO--(BUSINESS WIRE)-- Growth in hospital charges for the coming years will likely continue within a range below its historical average, Fitch Ratings says. We expect the lingering impact of sequestration on Medicare, the continuing reimbursement pressure and the recent flattening of consumer price index (CPI) growth for hospital and related services to exert downward pressure on charges. The U.S. Centers for Medicare and Medicaid Services reported that average charges for most hospital services rose by less than 5% in 2011 and 2012. The data was taken from over 3,000 hospitals that accept Medicare.

As price increases are not necessarily directly correlated with reimbursement, the impact on hospitals will vary depending on payor mix and reimbursement methodology. Providers reimbursed under the percentage of charge methodology will likely continue to use charge increases to offset reimbursement pressures from other payors, including Medicare. And providers with a very high exposure government payors (Medicare and Medicaid) will only have a limited capacity to use charge increases to generate a meaningful benefit to their bottom line.

The sequestration cuts impacting Medicare payments that went into effect in April of last year will continue to hold charge increases down. We estimate the annualized impact of sequestration at approximately $11 billion across healthcare providers. Lower growth in hospital charges is reflected in the slowing growth in the hospital price index, which was 4.8% from 2011 to 2012. It continued to fall to 4.4% from 2012 to 2013, and 2014 has shown a continuation of that trend.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Emily Wadhwani

Director

U.S. Public Finance, Healthcare

+1 312 368-3347

70 West Madison

Chicago, IL

or

Rob Rowan

Senior Director

Fitch Wire

+1 212 908-9159

33 Whitehall Street

New York, NY

or

Media Relations

Elizabeth Fogerty, New York, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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