When it comes to excessive healthcare costs, no country wants a lead role… but that’s exactly the situation in America.  Why? Answers vary, ranging from the high cost of prescription drugs to the myriad of administrative obstacles in dealing with multiple payers.  What’s the solution?  We take a look.

Excessive Healthcare Costs

Why does America suffer excessive healthcare costs?

A New York Times article explains that “at just over 25 percent of total spending on hospital care (or 1.4 percent of total United States economic output), American hospital administrative costs exceed those of all the other places. The Netherlands was second in hospital administrative costs: almost 20 percent of hospital spending and 0.8 percent of that country’s G.D.P.  Hospitals are not the only source of high administrative spending in the United States. Physician practices also devote a large proportion of revenue to administration. By one estimate, for every 10 physicians providing care, almost seven additional people are engaged in billing-related activities.”

Billing related activities are definitely a factor in the cost of care. Are these excessive healthcare costs an argument for a single payer solution?  “We estimated physician practices in Ontario spent $22,205 per physician per year interacting with Canada’s single-payer agency—just 27 percent of the $82,975 per physician per year spent in the United States.”, according to a study published in the US National Library of Medicine and National Institutes of Health. But is it only single payer that can reduce the disparity in costs?

“Hidden from view: The complexity of the system comes with costs that aren’t obvious but that we all pay.” — from, “The Astonishingly High Administrative Costs of U.S. Health Care,” in the New York Times

The Pharmaceutical Factor in Excessive Healthcare Costs

And system complexity includes not only payer variables but also drug costs.  A different study, this time in JAMA — Journal of the American Medical Association — concluded that “The United States spent approximately twice as much as other high-income countries on medical care, yet utilization rates in the United States were largely similar to those in other nations. Prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the United States and other high-income countries. As patients, physicians, policymakers, and legislators actively debate the future of the US health system, data such as these are needed to inform policy decisions.”  It’s interesting, given the lower prices of drugs in Canada, that the first study did not seem to consider these costs, finding instead for administration costs associated with multiple payers as the major difference in health cost percentages.

A recent article in The Tennessean presents more evidence that drugs are a root problem of excessive healthcare costs.  “For example, consumers in the U.S. pay $2,669 for a 28-day supply of the rheumatoid arthritis drug Humira, while the Swiss pay just $822 — less than a third of the U.S. price.”  The article also points out that other countries negotiate drug prices and if the U.S. is unwilling to do so, then they could open up the ability to purchase drugs from other countries — a free market solution.

Pricing Transparency as Part of the Solution for Excessive Healthcare Costs

In the same story, the Tennessean advocates that there be a requirement for “hospitals to post prices.”  They observe that “lobbying groups have been calling for this policy to be implemented for years, and Colorado is one of the first states to answer that call. Beginning this year, Colorado hospitals began publicly posting self-pay prices for the 50 most common diagnoses and procedures.”  At The SSI Group, we offer patient payment planning software as part of our “Access Director” solution which helps hospitals show likely costs for care to patients up front.

Another report in the US National Library of Medicine and National Institutes of Health concluded that “a simplified financing system in the U.S. could result in cost savings exceeding $350 billion annually, nearly 15% of health care spending.”

For its part, an article in MarketWatch suggests a 5-point solution, including:

  1. Give patients and healthcare consumers more information.  Here the point is made that in some countries the prices for care are posted on physician’s walls.
  2. Give patients and healthcare consumers more power.  Self-care can go a long way to combat excessive healthcare costs.
  3. Lower the number of medical tests for patients.  Many tests are unnecessary.
  4. Increase competition among health care providers.  Prices rise after mergers.
  5. Let Medicare negotiate prescription drug costs for consumers.

We like this list and will continue to report on how hospital revenue cycle leaders are addressing excessive healthcare costs as we create and work with evolving technology solutions for our clients.