Health Expenditures by Service

V. Key Health Policy Issues >> B. Health Spending >> Health Expenditure Patterns >> Health Expenditures by Service (last updated 11.22.15)

Overview

The National Health Expenditure Accounts maintained by the Centers for Medicare and Medicaid Services, provide aggregate historical and projected national estimates of personal health expenditures, by type of service using the categories shown below. The report National Health Expenditure Accounts: Methodology Paper, 2014, Definitions, Sources, and Methods describes in detail the definitions used in the most recent revision to the NHEA data. CMS defines six broad categories of health services:

  • Hospital Care
  • Professional services (which includes physicians and clinical services, other professional services and dental services)
  • Other health, residential and personal care
  • Home health
  • Nursing care facilities and continuing care retirement communities
  • Retail outlet sales of medical products (which includes prescription drugs, durable medical equipment, and other non-durable medical products such as band-aids)

However, a Deloitte study has codified other direct and indirect types of health spending not captured by the NHEA, including complementary and alternative medicine practitioners and products, weight loss centers, nutritional supplements, homes for the elderly and other unmeasured expenses. These have been incorporated into the categories below.

Hospital Care

  • NHEA Definition: expenditures for hospital care include revenue received for all services provided in hospitals to patients. Thus, expenditures include revenues received to cover room and board, ancillary services such as operating room fees, inpatient and outpatient care, services of resident physicians, inpatient pharmacy, hospital-based nursing home care, hospital-based home health care and fees for any other services billed by the hospital such as hospice.
    • The value of hospital output is measured by total net revenue. This includes net patient revenues (gross charges less contractual adjustments, bad debts, and charity care). It also includes government tax appropriations, non-patient operating revenue such as receipts from cafeterias, gift shops and parking lots, and nonoperating revenue, such as interest income, contributions, and grants. Thus, although revenue is measured in accrued terms rather than cash terms, the value is expressed as what the hospital expects to receive, rather than what it charged. Non-patient revenues are included in the NHEA because hospitals take anticipated levels of these revenues into account when setting patient revenue charges.
    • The services of professionals working under salary for a hospital are reported with expenditures for that service. For example, care rendered by hospital residents and interns at a hospital is included in the hospital services estimate and excluded from the professional services estimates. In addition, some physicians receive professional fees from arrangements with hospitals, including minimum guaranteed income, percentage of departmental billing, and bonuses. These fees are counted with hospital expenditures, rather than with expenditures for physician services.
  • American Hospital Association. Chartbook: Trends Affecting Hospitals and Health Systems. Chartbook is now a web-based publication allowing AHA to update charts as new data become available. Includes Chapter 3: Utilization and Volume and Chapter 4: Trends in Hospital Financing.
  • AHA. Uncompensated Care Fact Sheet, January 2013. U.S. hospitals provided $41.1 billion in uncompensated care in 2011, according to the latest data from the AHA’s Annual Survey of Hospitals. That’s $1.8 billion more than in 2010. The total includes “bad debt” (services for which hospitals anticipated but did not receive payment) and charity care (services for which hospitals neither received nor expected payment because they determined, with help from the patient, the patient’s inability to pay). It does not include Medicaid and Medicare underpayment.
  • AHA. Underpayment by Medicare and Medicaid Fact Sheet, 2012 Update. Underpayment by Medicare and Medicaid to U.S. hospitals was $27.9 billion in 2010, up from $3.8 billion in 2000. Medicare reimbursed 92 cents and Medicaid reimbursed 93 cents for every dollar hospitals spent caring for these patients. This fact sheet provides the definition of underpayment and technical information on how this figure is calculated on a cost basis for Medicare and Medicaid.
  • AHA. The Costs of Caring: Sources of Growth in Spending for Hospital Care, 2012 Update. Much of the increase in spending on hospital care reflects advances in medicine that ultimately result in improved outcomes, longer life expectancy, and a better quality of life. However, alternative measures of what we are getting for our health care dollar could help us develop better tools to contain spending growth.

  • AHA. The Economic Contribution of Hospitals, January 2013.

    Most people understand the role that hospitals play in providing vital health care services to their communities. In 2011, America’s hospitals treated 129 million people in their emergency departments, provided care for 526 million other outpatients, performed 27 million surgeries, and delivered nearly 4 million babies. However, many people do not know that hospitals also play an important role in the economy. Nationally, hospitals employ almost 5.5 million people, support an additional 10 million jobs elsewhere in the economy, and annually create more than two trillion dollars in economic activity. Hospitals are also an economic mainstay, providing stability and even growth during times of recession – an important message for policy-makers, the business community and the public. The AHA has released an issue brief revealing the extensive state and national economic contribution made by hospitals.

  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy (March 2013). Chapter 3 covers hospital inpatient and outpatient services which describes industry trends in number of facilities, services, utilization, finances and Medicare payments. Chapter 5 covers ambulatory surgical center services, many of which are hospital-owned. Chapter 10 covers inpatient rehabilitation facility services. Chapter 11 covers long-term care hospital services.

Professional Services

  • NHEA Definition: expenditures reported in the professional services category include services rendered in establishments of health professionals. These establishments include physicians, clinics, dentist, and other medical professionals. Note that the services of professionals working under salary for a hospital, nursing home or other facility are reported with expenditures for that service.
  • Altarum Institute. Spending on Health Employment. Understanding that every dollar spent on health care is a dollar of income to health sector work­ers and suppliers, the Center conducts research to estimate health employment and compensation by detailed occupation in the health care services categories of the NHEA. This includes nonlabor inputs to the production of health services. Time series data addresses both descrip­tive and policy-related questions regarding efforts to bend the cost growth curve (presented at the 2011 AcademyHealth and International Health Economics Association meetings).

Physicians and Clinical Services

  • NHEA Definition: the physicians and clinical services category includes Offices of Physicians [including Doctors of Medicine (M.D.) and Doctors of Osteopathy (D.O.) (NAICS 6211)] and outpatient care centers [outpatient care centers include ambulatory surgical centers, diagnostic imaging centers (NAICS 6214)], plus the portion of medical and diagnostic laboratories services that are billed independently by the laboratories (a portion of NAICS 6215).
    • Note above that care rendered by hospital residents and interns at a hospital is included in the hospital services estimate and excluded from the professional services estimates. The same is true of salaried physicians working in nursing homes or other long-term care facilities.
    • As well, some physicians receive professional fees from arrangements with hospitals, including minimum guaranteed income, percentage of departmental billing, and bonuses. These fees are counted with expenditures for hospital care, rather than with expenditures for physician services.
  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy (March 2013). Chapter 4 covers physician and other health professional services which describes industry trends in number of providers/practices, utilization, finances and Medicare payments. Chapter 6 covers outpatient dialysis services.
  • Physician compensation, by specialty, 2011
  • Lewin Group. The State-Level Economic Impact of Office-Based Physicians (February 2011). The report provides information on the economic impact of office-based physicians in all 50 states and the District of Columbia. Economic impact is reported at state level and national level. It also provides a snapshot of the economic impact of office-based physicians compared to other select industries at the state level.
    • Total Output. On average, each office-based physician supported $2.2 million in output across the nation.
    • Jobs. On average, each office-based physician supported 6.2 jobs across the nation, including his own. 
    • Wages and Benefits. On average, each office-based physician supported $1.3 million in wages and benefits across the nation.
    • Taxes. On average, each physician generated nearly $100,000 in state and local tax revenue across the nation.

  • Nicholas Roth. The Costs and Returns to Medical Education (2011).

  • Labs, Diagnostic Facilities & Telemedicine (HealthHippo)

Other Professional Services

  • NHEA Definition: other professional services category includes services provided in offices of other health practitioners (NAICS 6213). Professional services include those provided by chiropractors, optometrists, physical, occupational, and speech therapists, podiatrists, and private-duty nurses, among others. However, just as salaried physician services provided at hospitals are included under hospitals and excluded from the physician services estimate, the same is done with other professional services, including those provided by nursing home staff nurses in a nursing home (which likewise are included with nursing care facilities and continuing care retirement communities and excluded from the professional services estimate).
  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy (March 2013). Chapter 7 covers post-acute care providers, such as therapists which describes industry trends in number of providers/practices, utilization, finances and Medicare payments.
  • Nursing Shortage: Specialty Care is a Weak Spot in the System

Dental Services

Miscellaneous Services

  • Deloitte Study. The Deloitte study codifies separate spending figures for a) all other ambulatory care; b) complementary and alternative medicine (CAM) professionals; and c) weight-reducing centers, none of which are included in the NHEA.

Other Health, Residential and Personal Care

  • NHEA Definition: Other health, residential, and personal care combines spending for health care in many different programs including school health, worksite health care, Medicaid home and community based waivers, some ambulance services, residential mental health and substance abuse facilities, and other types of health care. Generally, services are provided in non-traditional settings. Expenditures for medical care provided in non-traditional settings includes care provided in community centers, senior citizens centers, schools, and military field stations.  One of the largest categories of government spending for this category is home and community-based waiver programs under Medicaid. In these programs, states may apply for waivers to some of the statutory provisions in order to provide care to beneficiaries who would otherwise require long-term inpatient care in a hospital or nursing home. Examples of types of services provided under these waivers include rehabilitation, respite care, and environmental modifications. This care is frequently delivered in community centers and senior citizens centers and through home visits by various kinds of medical and non-medical personnel.

Home Health Care

  • NHEA Definition:  The home health care component of the NHEA measures annual expenditures for medical care services delivered in the home by freestanding home health agencies (HHAs). NAICS 6216 defines home health care providers as private sector establishments primarily engaged in providing skilled nursing services in the home, along with a range of the following: personal care services; homemaker and companion services; physical therapy; medical social services; medications; medical equipment and supplies; counseling; 24-hour home care; occupational and vocational therapy; dietary and nutritional services; speech therapy; audiology; and high-tech care, such as intravenous therapy. Hospital-based HHAs are classified with hospitals (NAICS 622), and are therefore included with hospital care expenditures.
  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy (March 2013). Chapter 9 covers home health care services which describes industry trends in number of providers/agencies, utilization, finances and Medicare payments. Chapter 12 covers hospice services.
  • Long Term Care (HealthHippo)

Nursing Care Facilities and Continuing Care Retirement Communities

Nursing Care Facilities and Continuing Care Retirement Communities

  • NHEA Definition: Expenditures reported in this category are for services provided in freestanding nursing homes and continuing care retirement communities. These facilities are defined in the 2007 NAICS as private sector establishments primarily engaged in providing inpatient nursing, rehabilitative, and continuous personal care services to persons requiring nursing care (NAICS 6231) and continuing care retirement communities with on-site nursing care facilities (NAICS 623311). In the NHEA, hospital-based nursing home care is included with hospital care expenditures (NAICS 622). The services of professionals working under salary for a nursing home, or other type of health care establishment are reported with expenditures for that service. For example, services provided in a nursing home are included with the category nursing care facilities and continuing care retirement communities and excluded from the professional services estimate.
  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy (March 2013). Chapter 8 covers skilled nursing home care services which describes industry trends in number of facilities, utilization, finances and Medicare payments. Chapter 11 covers long-term care hospital services.
  • Long Term Care (HealthHippo)

Homes for the Elderly

Retail Outlet Sales of Medical Products

NHEA Definition: This class of expenditure is limited to spending for products purchased or leased from retail outlets and through mail order. The value of drugs and other products provided to patients in hospitals (on an inpatient or outpatient basis), nursing homes, and other provider settings, are implicit in estimates of spending for those providers’ services. The one exception is for optical goods, which comprise a large portion of optometrist receipts NAICS (62132). Receipts for these products are removed from optometrist’s receipts and included in the durable medical equipment (DME) category.

Prescription Drugs

Durable Medical Products

  • NHEA Definition: expenditures in this category represent retail sales of items such as contact lenses, eyeglasses and other ophthalmic products, surgical and orthopedic products, medical equipment rental, oxygen and hearing aids. Durable medical equipment (DME) generally has a useful life of over three years whereas nondurable products last less than three years.
  • Medical Devices and Supplies (HealthHippo)

Other Non-Durable Medical Products

  • NHEA Definition: other non-durable medical products include non-prescription drugs (products purchased over the counter such as analgesics and cough and allergy medications) and medical sundries (items such as surgical and medical instruments and surgical dressings, and diagnostic products such as needles and thermometers).

Other

  • Deloitte Study. The Deloitte study codifies separate spending figures for a) complementary and alternative medicine (CAM) products; b) health publications; and c) nutrition/supplements, none of which are included in the NHEA.

Informal Caregiving

  • NHEA Definition: Informal caregiving is excluded from the NHEA.
  • Economic Cost of Informal Caregiving. Various estimates put the total economic cost of informal caregiving at $700 billion or more inclusive of the value of caregiver time (most recent estimates ranging from $470 billion to $522 billion) plus at least $220 billion for caregiver out-of-pocket expenses. See Informal Caregiving.

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