Canadian Institute for Health Information
1
Canadian Institute for Health Information
Health Care Cost Drivers
April 28, 2011
2
Hospital Cost Drivers
3
Overview
• How does growth in hospital spending compare
to overall health spending trends?
•
What are the effects of possible cost drivers?
–
–
–
–
Inflation
Population growth
Aging
Others
• Technology/innovation
• Utilization
•
What are the key issues to watch in the future?
4
General Context
5
Hospital-to-GDP Ratio Similar to 30 Years Ago
Total Hospital Expenditure as a Percentage of GDP
5%
4%
3%
Stable Growth
Between 2003
and 2008
2%
1%
0%
1975
1980
1985
1990
1995
Hospital Spending to GDP
2000
2005
2010f
Forecast
6
Steady Decline in Hospital Share Until Late 1990s
20%
60%
10%
30%
Share
40%
Fiscal
Restraint
5%
20%
0%
2010f
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
-5%
10%
1976
Growth Rate
50%
Stable in
Last 10 Years
15%
0%
Public-Sector Hospital Expenditure Growth Rate
Total Public-Sector Health Expenditure Growth Rate
Public-Sector Hospital Share of Total Public-Sector Health Expenditure
Share Forecast
7
Public-Sector Share of Hospital Spending
Unchanged Since 2000
Public-Sector Share of Total Health Expenditure
100%
99 99
91 91
75
80%
72
60%
35
40%
20%
10
39
7
0%
Hospitals
Other
Institutions
2000
Physicians
Other
Professionals
Drugs
2010f
8
Growth in Public-Sector Hospital Expenditure
Stable in Last Five Years
Average Annual Growth in Selected Categories,
2010 Versus AAG for Previous 10 Years
14%
12.7
12%
10%
8%
8.1
7.6
6.1 6.2
6.8
5.5
6%
6.1
7.9
6.9
6.9
6.9
5.2
5.1
3.8
4%
2%
0%
Hospitals
Other
Institutions
Average (1999–2004)
Physicians
Drugs
Average (2004–2009)
Total Health
Spending
2010f
9
Key Findings: General Context
• Hospital expenditures relative to GDP similar to levels
30 years ago
• Following a period of steady decline, hospital share of
public-sector health expenditure remained stable in
the last 10 years
• Average annual growth of 6% between 2004 and 2010
10
Hospital Cost Drivers
11
Population Growth and Aging Account for 2% of
Annual Increase in Public-Sector Hospital Expenditure
Average Annual Growth, 1998 to 2008
8%
6.7
7%
6%
1.9
5%
1.0
4%
1.0
3%
2%
2.8
1%
0%
General Inflation
Population Growth
Population Aging
Other
12
Inflation and Compensation
13
Compensation Accounts for More Than 60%
of Total Hospital Expenditure
14
Moderate Growth in FTE Hospital Employees
Index of Growth (1999 = 100)
125
121
120
Index
115
110
105
100
95
90
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
15
Growth in Wage Rate in Hospitals Between 1999
and 2008 Was Higher Than General Inflation
Indexes of Growth (1999 = 100)
140
133
129
127
Index
130
120
110
100
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Hourly Paid Hospital Employees Wage Index
General Inflation
Industrial Aggregate Average Weekly Earnings Index
16
Growth in Compensation Rates Varied Across
Functional Centres
Average Annual Rates of Growth, 1999 to 2008
5.0
5%
4.5
4.2
4%
4.3
3.8
3.7
3%
2.7
Industrial
Aggregate
Average
Weekly
Earnings
2%
1%
0%
Nursing
Inpatient
Services
Diagnostic and
Therapeutic
Services
Clinical
Laboratory
Diagnostic
Imaging
Radiation
Oncology
All Hospital
Functional
Centres
17
Key Findings: Inflation and Compensation
• FTE hospital employees increased by 21% between
1999 and 2008
• The hourly paid hospital employees wage index
increased by 33% between 1999 and 2008, more
than general inflation (29%)
• Increase in total employee compensation driven more
by higher compensation rates than by higher number
of employees
18
Population Growth and Aging
19
The Structure of the Canadian Population
Has Shifted Toward Older Age Groups
10%
8%
6%
4%
2%
0%
1998 Age Distribution
2008 Age Distribution
20
Population Growth and Aging Accounted for
$8.1 Billion Increase in Hospital Expenditure
Simulated Hospital Expenditure: 2008 Expenditure per Capita
and 1998 Population Versus 2008 Actual Expenditure ($000)
$44,265,265
$36,184,224
1998 Population With
2008 Expenditures
2008 Population With
2008 Expenditures
21
Effects of Population Growth and Aging
Varied Across Jurisdictions
Average Annual Growth, 1998 to 2008
3%
2%
1%
0%
-1%
N.L.
P.E.I.
N.S.
N.B.
Que.
Ont.
Man. Sask.
Population Growth
Alta.
B.C.
Y.T. N.W.T. Can.
and
Nun.
Aging
22
Highest Spending per Capita for Infants
and Older Seniors
Hospital Expenditure per Capita, 2008
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
23
Highest Rates of Increase for Infants
and Those Age 90+
Average Annual Growth, 1998 to 2008
6%
5%
4%
3%
2%
1%
0%
Spending per Capita by Age Group
Spending per Capita—Average for All Age Groups
24
Key Findings: Population Growth and Aging
• Population growth and aging together accounted for
less than a third of the increase in hospital expenditure
between 1998 and 2008
• Effects of population aging on hospital spending
varied across jurisdictions
25
Technology/Innovation
26
Technology: Likely Important Supply-Side Factor
Responsible for Hospital Spending Growth
• Diagnostic imaging equipment and other medical
devices, such as
–
–
–
–
CT and MRI scanners
Robotic devices that facilitate delicate surgical procedures
Computers that help clinicians in decision-making
Electronic health records and electronic medical records
• New pharmaceuticals
• Innovative procedures, applications and techniques
and changes in clinical practices
27
Substantial Increase in Number of CT and MRI
Scanners Since 2003
CT and MRI Scanners in Hospitals, per Million Population
15
10.0
10.3
11.1
11.5
13.1
13.5
6.3
6.3
2009
2010
12.1
10
5
3.9
4.1
2003
2004
4.7
5.1
5.5
2005
2006
2007
0
CT Scanners
2008
MRI Scanners
28
Number of CT and MRI Exams Increased at a
Faster Pace Than Number of Scanners Since 2003
CT and MRI Exams in Hospitals, per 1,000 Population
140
118
120
124
110
102
100
87
90
80
60
40
31
33
24
27
2003–2004
2004–2005
2005–2006
2006–2007
40
43
2008–2009
2009–2010
20
0
CT Exams
2007–2008
MRI Exams
29
Expenditures for CT and MRI Scans Have
Increased at Double-Digit Rates
Expenditure per Capita for Diagnostic Imaging in Hospitals
Type of Diagnostic
Imaging Technology
2003
2008
Annual Rate
of Increase
Computed Tomography (CT)
$9.09
$16.29
12.4%
Magnetic Resonance Imaging (MRI)
$4.70
$10.84
18.2%
Nuclear Medicine (in Vivo)
$6.71
$8.77
5.5%
Other Diagnostic Imaging
$51.48
$63.16
4.2%
Total Diagnostic Imaging
$71.98
$99.06
6.6%
30
Drug Expenses in Hospitals Have Shifted
From Inpatient to Outpatient Care
70%
60%
Inpatient Share
50%
40%
Outpatient Share
30%
20%
10%
Drugs as a Share of Total Hospital
Expenditure Remained Stable
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
31
Key Findings: Technology/Innovation
• Impact of technology on costs is difficult to quantify
• Increased number and use of CT and MRI scanners
• Increased expenditure per capita for CT and MRI scans
32
Utilization Effects
33
Little Increase in Average Length of Stay
Average Length of Stay
8
7
7.0
7.2
7.2
7.1
7.0
7.1
7.2
7.3
2001
2002
2003
2004
2005
2006
2007
2008
6
Days
5
4
3
2
1
0
34
Variation Among Top Five CMGs
Average Acute Length of Stay (Days)
Acute LOS Trend (2005 to 2008) of the Five CMGs
With the Largest Expenditure in 2008
16
14
12
10
8
6
4
2
0
2005
2006
810—Palliative Care
139—Chronic Obstructive Pulmonary Disease
545—Vaginal Delivery, No Other Intervention
2007
2008
196—Heart Failure Without Cardiac Catheter
321—Unilateral Knee Replacement
35
Modest Increase in Resource Intensity
of Inpatients
CMG+ 2010 Average RIW
1.60
1.40
1.27
1.30
1.33
1.36
2005
2006
2007
2008
1.20
1.00
0.80
0.60
0.40
0.20
0.00
36
Slight Variation in Resource Intensity Trends
Across Groups
Average
RIW(2005
Cost to
Trend
(2005
toFive
2008)
of the
RIW Trend
2008)
of the
GMGs
Five CMGs
With
the Largest
Expenditure
With the
Largest
Expenditure
in 2008in 2008
3.0
RIWRIW
Mean
2.5
2.0
1.5
1.0
0.5
0.0
2005
2006
810—Palliative Care
196—Heart Failure Without Cardiac Catheter
545—Vaginal Delivery, No Other Intervention
2007
2008
321—Unilateral Knee Replacement
139—Chronic Obstructive Pulmonary Disease
37
Slight Decrease in Beds per 1,000 Population
Since 1999
Beds Staffed and in Operation in Hospitals, per 1,000 Population
4.0
3.6
3.5
3.4
3.3
3.2
3.3
3.2
3.2
3.2
3.1
2001
2002
2003
2004
2005
2006
2007
2008
3.0
2.0
1.0
0.0
1999
2000
38
Inpatient Discharges Fell Sharply During
the 1990s, Less So Since 2002
Total Discharges, per 1,000 Population
140
120
100
80
60
40
20
0
39
Share of Hospital Expenditure for Inpatient Care
Has Declined, Outpatient Care Has Grown
Hospital Expenditure by Broad Functional Categories
100%
80%
5.6
7.0
7.5
33.2
35.3
37.4
61.2
57.7
55.2
1999
2005
2007
60%
40%
20%
0%
Inpatient Care
Outpatient Care
Other Activities
40
Hospitals Provided 200,000 More Day Surgery
Procedures in 2007–2008 Than in 2004–2005
578,417
570,630
563,335
1,872,661
1,992,676
2,026,423
2,082,883
2004–2005
2005–2006
2006–2007
2007–2008
567,329
Day Surgery
Inpatient Surgery
41
Rates of Emergency Room Visits Unchanged;
Higher Cost per Visit Responsible for
Increasing ER Share
2003
2008
ER Visits per 1,000 Population
486
490
Cost per Visit
$113
$166
ER Share of Hospital Expenditure
4.5%
5.0%
42
Increases in Cost of Providing Services Most
Important Factor in Expenditure for Ambulatory
Care and Therapeutic Services
Average Annual Growth per 1,000 Population,
2003 to 2008
Emergency
0.1
8.1
1.8
Other Ambulatory Care
9.0
Physiotherapy
0.7
Occupational Therapy
0.8
Other Therapeutics
4.4
4.8
2.7
Visits or Attendance Days
5.0
Expenditure
43
Operating Room, Emergency and Ambulatory Care
Have Increased Their Shares of Hospital Expenditure
Expenditures by Patient Care Functional Categories
31.2
Nursing Inpatient Services
27.9
5.7
6.4
Operating Room
Emergency
4.0
5.0
6.8
8.7
Other Ambulatory Care
20.8
21.5
Diagnostic and Therapeutic
Community and Social Services
3.9
2.6
1999–2000
2008–2009
44
Shares of Expenditure for Administrative
Services Unchanged
Expenditures by Other Functional Categories
5.5
5.5
Administrative Services
Information Systems
1.8
2.4
16.3
14.9
Support Services
Research and Education
3.2
4.7
1999–2000
2008–2009
45
Key Findings: Utilization
• Decrease in beds and discharges per 1,000
population, but increase in resource intensity
of inpatients
• Evidence of a shift from inpatient care to
outpatient care
• Ambulatory care visits have increased, but not
as much as cost per visit
• The share of administrative services has
remained constant
46
Key Issues to Watch in the Future
• Hospital inflation outpacing general inflation
• Growing impact of technological changes on
hospital expenditure
• Hospital resources required by the average
inpatient increasing
• More limited opportunities for cost savings in
shifting care from an inpatient to an outpatient
mode of production
47
Questions?
48
Overview of Other
Health Expenditures
49
Overview
• What are the growth trends in health spending
categories other than hospitals, physicians and drugs?
• What are some of the key trends in public-sector
spending on long-term care?
• How have capital investments in buildings and
equipment affected overall spending?
• What are the key issues to watch in the future?
50
Rising Share of Other Health Expenditures
During the 1990s
Share of Total Health Expenditure by Use of Funds,
Selected Categories
50%
40%
30%
41.6 41.1
39.1
34.4
29.6 28.9
20%
15.4
16.3
11.4
15.2
13.4 13.7
10%
0%
Hospitals
Drugs
1990
Physicians
2000
Other
2010f
51
Long-Term Care, Public Health and Capital Are
Significant Categories of Other Health Spending
Distribution of Other Health Expenditures by Category, 2010f
Public Sector: $46.5 Billion
Other
$3.7
8%
Capital
$6.9
15%
Public Health
$12.2
26%
Administration
$2.7
6%
Health Research
$2.3
5%
Other Professionals
$1.5
3%
Other Institutions
$13.3
29%
Home Care
$3.9
8%
Dental Care: 44%
Vision Care: 20%
52
Public Health, Capital and Long-Term Care
Are Mainly Financed by the Public Sector
Public-Sector Share of Categories
100 100
100%
80%
76
81
71
63
67
83
62
55
60%
61
44
40%
20%
10
7
0%
1998
2008
53
Capital, Health Research and Public Health:
The Fastest-Growing Categories
Public-Sector Average Annual Growth, 1998 to 2008
16%
Average Annual Growth
13.7
12%
11.3
9.6
8%
7.7
6.6
5.4
4%
0%
54
Increased Spending on Public Health
Public Health Expenditure as a Percentage
of Total Public-Sector Spending
10%
8%
6%
4%
2%
0%
1975
1980
1985
1990
1995
2000
2005
2010f
55
Share of Public-Sector Administration Spending
Relatively Unchanged in the Past Five Years
Public-Sector Administration Expenditures as a Percentage of Total
4%
3.5
3.2
3.7
3.8
3.8
3.7
3.5
3.5
3.4
3.4
3.3
3%
2%
1%
0%
56
Growth in Spending on Other Health Professionals
Higher in the Private Sector
$600
5.6%
6%
$500
5%
$400
4%
$300
3%
$200
2%
1.7%
$100
1%
Average Annual Growth
Per Capita Spending
$515
$41
$0
0%
Public
Per Capita (2008)
Private
AAG (1998–2008)
57
More Health Professionals
2004
2004
Number of
Physicians
Number of
Regulated Nurses
Number of
Dentists and
Dental Hygienists
Number of
Optometrists
60,612
Percentage
2008
Change
8.0%
65,440
315,135 341,431
Population
Increase
8.3%
35,866
41,798
16.5%
3,941
4,507
14.4%
4.2%
58
Public-Sector Spending
Trends in Long-Term Care
59
The Structure of the 65+ Population Has
Shifted Toward Older Seniors
35%
Share of Each Senior Age Group in the 65+ Population
31
30%
29
26
25%
23
20
20
20%
15
15%
13
13
10
10%
5%
0%
65–69
70–74
75–79
1998 Age Distribution
80–84
85+
2008 Age Distribution
60
Long-Term Care Does Not Account for Increasing
Share of Public-Sector Health Expenditure
Public-Sector Expenditures on Long-Term Care as a Percentage of Total
16%
2.9
2.9
2.9
2.8
2.8
2.7
12%
2.7
2.7
2.7
2.8
2.8
10.8
10.3
10.0
8%
12.1
12.0
11.8
11.7
11.6
11.4
11.4
11.0
4%
0%
Institutional Care
Home Care
61
Growth Rates in Long-Term Care Institution
Spending per Capita for the Oldest Senior Age
Groups Among the Lowest
4%
$12,000
AAG: 1998–2008
$10,000
3%
$8,000
2%
$6,000
$4,000
1%
$2,000
0%
$0
65–69
70–74
75–79
Growth in Expenditure per Capita
80–84
85–89
90+
Expenditure per Capita (2008)
62
Population Aging: Greater Effect in
Long-Term Care Institutions
Average Annual Growth in Spending Attributable
to Population Aging, 1998 to 2008
Average Annual Growth
3%
2.3
2%
1%
1.0
1.0
0.8
0.6
0%
63
Beds Staffed and in Operation per
1,000 Seniors Relatively Unchanged
Beds per 1,000 Population (65+)
30
25
20
15
10
5
0
2004
2005
2006
Public
2007
2008
Private
64
Average Annual Growth Rate in Number of
Beds in Long-Term Care Institutions per 1,000
Seniors Varied in Selected G7 Countries
Average Annual Growth
2004 to 2008
3.0
3.0
2.0
1.0
0.3
0.0
0.0
0.2
-0.1
-0.5
-1.0
United
States
United
Kingdom
Japan
Italy
Germany
(2003–2007)
Canada
65
Compensation Unchanged, Number of
Full-Time Equivalents Increasing
Inflation-Adjusted Salary and Wage Expenditures
per Full-Time Equivalent, and Number of Full-Time
Equivalents per 100,000 Population
$40,000
800
$30,000
600
$20,000
400
$10,000
200
$0
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Salary and Wage Expenditures per FTE
FTE/100,000
66
An Increase of More Than $1 Billion in
Home Care Spending
5.0
Provincial/Territorial Government Spending
on Home Care, Current Dollars
$3.9
$ Billions
4.0
3.0
$2.6
2.0
1.0
0.0
1999–2000
2006–2007
67
Government-Sponsored Home Care
Users Rising
30
25
Government-Sponsored Home Care Users
per 1,000 Population
28.1
23.9
20
15
10
5
0
1994
2005
68
Higher Proportion of Residents 85+ in
Homes for the Aged
60%
Percentage Distribution of Residents 65+ in Homes
for the Aged
54.5
50.4
50%
40%
30%
22.6 22.0
20%
10%
14.8
4.1 4.1
12.7
8.1 6.7
0%
65–69
70–74
75–79
1998
80–84
85+
2008
69
Rising Proportion of Residents in Homes
for the Aged Receiving Type III and
Higher Care
35%
33%
30%
25%
25%
20%
15%
10%
5%
0%
1998
2008
70
Alternate Level of Care Is an
Important Issue
• In 2008–2009, there were more than 92,000
hospitalizations and more than 2.4 million hospital
days involving alternate level of care stays in Canada.
This represented 5% of all hospitalizations and 13% of
all hospital days.
• There is a perception that a growing proportion of
elderly patients tie up hospital beds while waiting
for a place in long-term care.
71
Overview of Capital
Expenditures
72
Share of Public-Sector Spending on Capital
Trended Upwards in the Last Decade
Capital Spending as a Percentage of Total Public-Sector
Health Spending
6%
5%
4%
3%
2%
1%
0%
1975
1980
1985
1990
1995
2000
2005
2010f
Capital to Total
73
Distribution of Total Capital Expenditures
100%
53
49
47
47
40
40
44
44
38
42
36
47
51
53
53
60
60
56
56
62
58
64
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
80%
60%
40%
20%
0%
Equipment
Construction
74
Capital Expenditure in Health Care
Capital investment by type of asset:
1) Construction: facilities and building construction
2) Equipment
Annual Capital Investment by Type of Asset, 1998 to 2008
Value ($ Billions)
1998
(% of Total)
2008
(% of Total)
AAG
1998–2008
Equipment
1.2
53.5%
3.0
36.3%
9.3%
Construction
1.1
46.5%
5.2
63.7%
17.2%
Total
2.3
100.0%
8.2
100.0%
13.6%
Type of Asset
75
Increasing Share of Capital Spending for
Residential Care Facilities
1998
2008
Total Capital Spending: $2.3 Billion
Total Capital Spending: $8.2 Billion
Nursing and
Residential
Care
Facilities
16.5%
Nursing and
Residential
Care
Facilities
11.4%
Social
Assistance
2.5%
Ambulatory
Health Care
Services
10.9%
Hospitals
75.2%
Hospitals
73.2%
Social
Assistance
0.8%
Ambulatory
Health Care
Services
9.5%
76
Overall Key Findings
• Long-term care does not account for an increasing
share of health spending in the public sector
• The number of full-time equivalent (FTE) personnel
(not wages per FTE) is mainly responsible for the
increase in institutional care spending
• From 2004 to 2008, trends in beds staffed and in
operation kept pace with demographics
• Capital investment in the health care sector
significantly increased from 1998 to 2008; the trend
was led mostly by long-term care institutions
77
Key Issues to Watch in the Future
• What is the best way to provide care for seniors?
– What will be the balance between hospital care,
institutional care and home care during the next decade?
– How will the system optimize the integration of
seniors’ care?
• How will provincial deficits and fiscal restraint in future
years affect investment in public health and capital?
78
Questions?
Thank You
80