American Hospitals Waste a Shocking Amount on Administrative Costs
A new study in Health Affairs found we are wasting roughly $150 billion a year on hospital administrative costs. From Health Affairs:
We found that administrative costs accounted for 25.3 percent of total US hospital expenditures—a percentage that is increasing. Next highest were the Netherlands (19.8 percent) and England (15.5 percent), both of which are transitioning to market-oriented payment systems. Scotland and Canada, whose single-payer systems pay hospitals global operating budgets, with separate grants for capital, had the lowest administrative costs. Costs were intermediate in France and Germany (which bill per patient but pay separately for capital projects) and in Wales. Reducing US per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011. This study suggests that the reduction of US administrative costs would best be accomplished through the use of a simpler and less market-oriented payment scheme.
While the Affordable Care Act had some provisions that were supposed to help reduce paperwork expenses, like promoting electronic records, but by just expanding the fragmented private insurance system it assured most of the needless waste will continue. Going with the creating of exchanges in fact just added another layer of bureaucracy onto a system already suffocating under the weight of administrative spending.
Photo by Ramberg Media Images under Creative Commons license.