After a significant drop in September, health construction starts increased significantly in October: A 1.3 percent increase versus a 1.0 percent increase for other construction starts (see Table I). On a twelve-month basis health facilities construction is still positive, but has been running slower than the booming non-health construction market: 6.1 percent versus 13.3 percent.
After an uptick in August, health construction starts declined significantly in September: A 0.1 percent decline versus a 0.6 percent increase for other construction starts (see Table I). On a twelve-month basis health facilities construction is positive, but running slower than the booming non-health construction market: 9 percent versus 14.3 percent.
The short-term decline occurred entirely among private health facilities, for which starts declined 0.3 percent. When looking only at private construction, health facilities and other building starts are at about the same rate of growth for the twelve-month period. Maybe it was time for a breather in September.
Remember how Obamacare was supposed to reduce the burden of so-called “uncompensated care” from uninsured patients that was driving hospitals bankrupt? Well, two years into Obamacare it hasn’t worked out that way:
Hospital operator HCA Holdings Inc on Tuesday said more patients are coming through its doors who have lost their health insurance, most likely because they stopped paying for it.
The largest U.S. for-profit hospital chain said it admitted more uninsured patients in the third quarter who had previously registered with health insurance, compared with a year ago. They included people who bought coverage from marketplaces set up under President Barack Obama’s Affordable Care Act, but then dropped it.
“We believe this is likely due to non-payment of premiums,” HCA Chief Financial Officer Bill Rutherford said on the company’s earnings call.
Overall, the company admitted 13.6 percent more uninsured patients in the third quarter. It was the second straight quarterly increase in uninsured admissions, reversing a downward trend since the insurance exchanges opened for business in early 2014
(Susan Kelly, “HCA says some patients dropping their new insurance coverage,” Reuters. October 27, 2015.)
Protecting hospitals’ revenues by increasing the number of insured Americans was never actually a legitimately important goal of health reform, although hospitals are very successful at making that case. Now, it looks like Obamacare doesn’t even do that.
After a few months lagging behind other construction, health facilities starts finally showed some life in August (See Table I). Although on a twelve-month basis health facilities construction is still running slower than the booming construction market overall, health construction grew by 1.9 percent from July. Other construction grew by only 0.6 percent.
When looking only at private construction, health facilities and other building starts are at about the same rate of growth for the twelve-month period. However, health facilities construction grew three times faster – 2.1 percent versus 0.7 percent – than other building starts over one month.
This morning’s release of a booming construction report from the Census Bureau once again shows lagging spending on new health facilities, especially in the public sector (see Table I).
Yesterday’s release of construction spending from the U.S. Census Bureau 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)
