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The Cost Growth Problem

Per National Health Expenditure data from the Centers for Medicare & Medicaid Services (CMS), health expenses nationally grew 3.9 percent to $3.5 trillion in 2017 and accounted for 17.9 percent of Gross Domestic Product (GDP). Under current law, national health spending is expected to grow at an average rate of 5.5 percent per year from 2018 to 2027 and reach nearly $6 trillion by 2027. With healthcare spending expected to grow 0.8 percentage points faster than GDP per year over that same time period, cost related to healthcare will rise to 19.4 percent of GDP in 2027. The rising cost of healthcare will remain a priority for governmental and commercial insurance carriers, patients, employers, and providers. Attention to this growth will be further exacerbated by the federal deficit and other economic challenges.

Hospitals have been a target for controlling that cost growth. Per CMS, the percent of national health expenditures in 2017 for hospital services was 32.7 percent of all healthcare spending. Conversely, expenditures for physician and clinical services represented 19.9 percent, prescription drugs 9.5 percent, and nursing care facilities and continuing care retirement communities comprised 4.8 percent of total health spending.

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Testing the Perception that Urban Hospitals are More Costly Providers of Hospital Care

Hospitals in the northeast, Texas, Florida, and California have long been criticized as high cost, high-length-of-stay providers. This criticism is often based on analytics that use regional variation in Medicare spending per beneficiary as the foundation for cost variation analysis.

In an effort to accurately portray progress by New Jersey hospitals and health systems and compare them to the rest of the country, CHART drilled into hospital cost and length-of-stay data and employed data neutralizing techniques to level the playing field to allow for an accurate national comparison.