The Affordable Care Act is reducing hospital health expenditures

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A new analysis suggests that the Affordable Care Act might be working to lower the volume of health care services hospitals provide – which is good news for health care cost containment.  In 2012, health expenditures consumed 17.9 percent of U.S. gross domestic product, a percentage that puts it far ahead of any other industrialized country in the world, according to World Bank data.

Standard and Poor’s Ratings Services (S&P)  finds that the utilization of health care services in America has been declining since 2012. While this trend was initially attributed to a weak economy, says S&P:

[Evidence points to the prevalence of high-deductible plans, which are causing consumers (or patients) to postpone deferrable procedures. Also, new payment models across government and nongovernment payors focus on care collaboration, which reduces redundancy and overall use of services. Further, lower-cost alternatives such as pharmaceuticals and outpatient care that are providing just as favorable outcomes for patients are also depressing utilization for some providers.

As a consequence of this, however, the hospital industry will be under increasing pressure to cut costs to make up for lost volume. (S&P concludes that the hospital industry will be seeing lower future profits.) One potential result of these reductions could be a slowing in the growth of health care unemployment in the future. While the health care sector continues to add jobs – 34,000 in May alone – overall growth has been relatively stable over the past decade.

While the final impacts from health care reform are far from clear, two things are worth noting: (1) the Affordable Care Act is having a noticeable impact on the overall volume of health care services provided, which is essential for cost control; and (2) these downward pressures will undoubtedly shift who wins and who loses in the health care industry.

Read the full S&P analysis here: