How Is Health Care Utilization Changing?

Coverage expansion basically plateaued in 2016, yet health care spending growth continues to increase. As seen in the latest report from the Altarum Institute, overall health care spending for Q1 2017 grew at 5.4 percent, slightly above the 5.2 percent estimated for 2016. In the current quarter, spending on health care services—the largest component of overall health spending—grew at an even higher rate of 5.7 percent during the first quarter. In an era of continued low prices, the bulk of this spending growth is attributable to increased utilization.

Paradoxically, current spending on health care is both higher and lower than expected. While current spending growth is somewhat higher than recent estimates, it is also the case that national health expenditures for the past several years have been growing at a rate which is below what the Centers for Medicare & Medicaid Services (CMS) projected in 2010. All components of spending between 2010 and 2015 were lower than CMS’ original projections, and based on more recent projections of National Health Expenditures, it is anticipated that spending between 2014 and 2019 will be less than originally forecast by approximately 12 percent.   

Though gains in coverage have slowed in 2016, current growth in spending and utilization remains relatively high. But while it is taking a bit longer than expected, there are clear signs that spending is slowing down. One important signal is the trend in health care job growth. Altarum reports that monthly growth in new health care jobs in the first quarter of this year is about 30 percent slower than this time last year, and thus far it seems that the trend in utilization is moving in a similar direction. If these trends hold, year-over-year growth in both jobs and utilization should fall sharply by the last quarter of 2017. Elements of proposed health care reform that would reduce either the number of people covered or the comprehensiveness of that coverage would be expected to accelerate that trend, though this is not an extremely consequential cost control strategy.

While the dynamics of coverage are very important factors in predicting trends in health care utilization, there are other structural changes at work in the delivery system which are affecting the health care work force and the types of health care services that are being consumed. The relationship between health care jobs and utilization is changing in recent years, as technology and the development of new types of services, such as telemedicine, are changing the labor productivity of the health care work force, essentially increasing the ratio of services to jobs. Growth in health care jobs and utilization has been greatest in ambulatory settings, while inpatient volume has been relatively flat.

The rapid growth of various forms of population health models and convenient care drives toward an environment where health care is available on-demand at all times, in ways which increasingly transcend clinic walls. Many have noted that convenient care does not reduce utilization per se. Yet, these trends in service delivery clearly have the potential to increase volume while reducing unit costs.  

Data from the most recent annual review from the physician staffing firm Merritt Hawkins illustrate this trend. One finding is that nurse practitioners were the fourth most recruited provider category, and nurse practitioners (NPs) and physicians assistants (PAs) combined were the third most recruited, trailing only family physicians and psychiatrists. Urgent care physicians were the twelfth most recruited specialty, rising from the twentieth spot just two years ago. While hospitals were the source of 63 percent of the provider searches tracked by the firm in 2011/2012, this had fallen to 46 percent in the most recent year. Ninety percent of searches were for employed positions.   

Merritt Hawkins notes that the number of retail clinics had increased by 47 percent since 2014, and retail clinics will soon have the capacity to accommodate 25 million annual visits. These clinics are largely staffed by NPs and PAs, as are urgent care clinics, which number over 7,000. Merritt Hawkins notes that urgent care clinics represent the “unusual intersection” of the interests of multiple stakeholders including consumers, providers and investors. A number of states are considering measures to further expand the scope of practice for NPs and PAs—steps which will serve to increase demand for these professionals.

Unfortunately, we lack timely comprehensive data on health care utilization and must infer it from trends in aggregate spending and prices for health care services. But given these broad trends in health care toward less costly settings, the pattern of health care spending growth fueled by utilization rather than price may well continue. As these models of service delivery continue to evolve, the notion of measuring utilization itself in discreet units such as visits may become an increasingly inaccurate way to characterize the way most people consume health care. The outcome of current efforts to reduce federal spending on health care are far from certain, but the erosion of coverage would be expected to significantly diminish volume, yet at the same time, potentially strengthen the emerging trend toward lower-cost care.