SSR Index of Current-Quarter Healthcare Demand Growth, Interim 3Q12 Estimate: Hospital Pricing Accelerates; Unit Demand Slows


We expect 3.9% y/y health services demand growth during 3Q/12, the product of 1.9% growth in unit demand and 2.0% growth in pricing. This marks a 10bp increase over our initial 3Q12 estimate, the net of a 20bp lower unit demand estimate and an almost 30bp higher pricing estimate

Weaker unit demand reflects continued slow job growth in the broader economy, and a flattening of hours worked in healthcare specifically. We view general employment as a lead indicator of demand; households with employer sponsored insurance consume roughly 2.7x the healthcare of age and health-status matched households without insurance. We use hours worked in healthcare settings as a coincident indicator of demand; providers (hospitals, doctors offices) produce no inventory, accordingly we believe that hours worked in these settings are tightly linked to patient demand

Healthcare pricing accelerated in August; this is particularly true in Hospitals, whose 3.6% August pricing rate was considerably higher than the 2.1% rate in July. We see the risk of over-interpreting a single data point, but would nevertheless emphasize our thesis that Hospitals’ aggregate pricing power is greater than is reflected in current valuations

Print Friendly, PDF & Email