Home Economy Government OHIC: hospital, drug costs drove jump in health care spending

OHIC: hospital, drug costs drove jump in health care spending

By

Katie Castellani

-

05/12/2025

HOSPITAL AND drug costs were the main drivers of a 7.8% rise in health care spending in 2023, according to a report released by the Office of the Health Insurance Commissioner Monday.

CRANSTON – Hospital and drug costs were the main drivers of a 7.8% rise in health care spending in 2023, according to a report released by the Office of the Health Insurance Commissioner Monday. The annual report assesses health care spending, quality and equity performance and includes updated recommendations to improve system oversight and affordability.

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CRANSTON – Hospital and drug costs were the main drivers of a 7.8% rise in health care spending in 2023, according to a report released by the Office of the Health Insurance Commissioner Monday. The annual report assesses health care spending, quality and equity performance and includes updated recommendations to improve system oversight and affordability. In 2023, the state’s health care cost growth target was 6% and set by the state’s Cost Trends Steering Committee. The target almost doubled – from 3.2% to 6% – to account for high inflation. However, spending still exceeded the target because of rising prices, increased use of medical services and use of expensive weight-loss drugs like GLP-1s. Spending rose across all major insurance markets. In the commercial market, spending per person was $6,735, up 6.9% from 2022. In Medicare, spending was $14,400 per person, up 8.7% from 2022 and $7,678 in Medicaid, a 6.7% rise over 2022. “This report confirms what Rhode Islanders already know and experience firsthand,” said R.I. Health Insurance Commissioner Cory King. “It’s more urgent than ever to shift our focus – and our dollars – toward solutions that improve health and bring costs down. That starts with investing in primary care.” The report’s findings related to hospitals were:

Per-person hospital spending rose: In 2023, inpatient and outpatient hospital care made up more than 40% of all health care spending in the state. Outpatient hospital costs in the commercial market rose 11.3%, from $1,618 to $1,801 per person. This rise was driven by increasing prices and utilization. Spending on emergency department services rose 12.5% while spending on imaging and radiology services increased 11% and outpatient surgery costs were up 8.5%. Inpatient hospital costs also rose 10.5%, from $1,112 to $1,229 per person, also driven by rising prices. Utilization was flat, but the average price for procedures like spinal infusions rose by up to 39% and the number of high-cost neurological procedures increased.
Hospital settings continue to drive higher costs for the same services: The standard lab test cost four times more when performed in a hospital versus a non-hospital setting. Also, imaging and endoscopic procedures were reimbursed at almost three times the non-hospital rate. Hospitals were paid three to seven times more for administering injections and chemotherapy and almost six times more for intravenous infusions and hydration services.

The report’s findings related to pharmaceuticals were:

Retail pharmacy spending rose 7.4% in 2023, partly driven by an increase in GLP-1 use. Between 2021 and 2023, commercial spending on GLP-1s like Ozempic, Wegovy and Mounjaro, totaled more than $121.4 million. In 2023, these medications accounted for more than half of all spending on diabetes and weight-loss drugs but comprised 20% of prescriptions in that category.
The commercialization of COVID-19 vaccines in 2023 led to a rise in prices. Manufacturers began selling COVID-19 vaccines under brand names like Comirnaty and Spikevax and negotiated directly with insurers. As a result, the cost for the average dose more than tripled from about $46 in 2022 to more than $150 in 2023.

Primary care is shown to improve health outcomes and reduce long-term costs. In response to the rising costs, regulations finalized by Gov. Daniel J. McKee in February require commercial insurers to increase investment in primary care and reduce barriers that delay care. The requirements in the new regulations include:

Insurers must raise the share of medical spending that goes to primary care each year, with a goal of at least 10% by 2029.
New investments must help services like care coordination, team-based care and behavioral health. They must also help primary care practices build staff and resources they need.
Insurers must reduce prior authorization requirements, particularly for requests managed by primary care providers and for services that are routinely approved. OHIC plans to publicly report on insurers’ prior authorization practices and form a statewide advisory group.

“These regulations mark a major step forward in making Rhode Island’s health care system more affordable and patient-focused,” King said. “They will make it easier for primary care teams to deliver timely care by removing unnecessary obstacles that too often get in the way.” Along with the state’s new regulations requiring commercial insurers to raise primary care spending, the report recommends the following:

Establishing a rate review process for primary care services reimbursed through Medicaid
Support the state’s participation in the federal States Advancing All-Payer Health Equity Approaches and Development, or AHEAD, program. This would bring new Medicare payments averaging $21 per beneficiary per month for practices starting in 2027.
Encouraging insurers and large employers to fund primary care equitably
Support payment models that better fund team-based care

As hospitals and physician groups face more financial pressures and consolidation, OHIC also recommends:

Support new systems to collect and publicly report data on hospital and health system finances
Boost state oversight of acquisitions when hospitals, insurers or private equity firms buy physician groups.

Along with tracking health care spending, OHIC also reports on health care quality, public health and health equity. This year’s report showed the state had good quality performance and made progress in boosting health care equity.

Among people with commercial insurance, Rhode Island scored at or above the national 75th percentile on all core measures with available benchmarks and above the 90th percentile on most. The state also saw above-average scores on all benchmarked measures. However, Rhode Island also showed large performance gaps between commercial and Medicaid enrollees on measures like breast cancer screening and well-child visits.
In 2023, OHIC created six statewide health equity measures with improvement goals. The report also shows baseline data for each.

“Affordable health care remains essential to the well-being of Rhode Islanders and the strength of our local economy,” McKee said. “This year’s report shows that we must keep pushing for smarter solutions." Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.