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I also work in the industry, specifically in claims processing and you're wrong. In the link that you sent they are not including administrative costs from prov

I also work in the industry, specifically in claims processing and you're wrong. In the link that you sent they are not including administrative costs from providers: > Administrative costs include spending on running governmental health programs and overhead from insurers but exclude administrative expenditures from healthcare providers

bhupy 5y ago
Yes, and that's because administrative expenditures from healthcare providers (specifically in claims processing, again I do this every day for a living) amortized per capita like it's done in this study is negligible. There's an upfront cost to setting up EHR systems to facilitate claims processing, and there's a variable cost to handling claims disputes, but they're a drop in the bucket compared to the actual patient costs, which we know to be in the tens of thousands of dollars per capita. There are a bajillion different reasons why raw costs are so high, but admin overhead isn't one of them.
- wefarrell 5y ago
  That's simply not true. Administrative costs account for 25% of a hospital's budget and 1.43 of GDP: https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us https://www.commonwealthfund.org/publications/journal-articl... In the study that you sent they would be included under the inpatient and outpatient costs rather than administrative.
  - bhupy 5y ago
    Yeah but you're mixing up denominators. The question is how you factor in 25% of a hospital's budget to the per capita cost of healthcare provision in the link that I included, which includes all other costs. Those other costs are so high that that even zeroing out the administrative cost doesn't do much to bridge the gap. I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.
    - wefarrell 5y ago
      The link that I spent specifically mentions hospital admin costs per capita and per GDP: >"Hospital administration costs ranged from 1.43 percent of gross domestic product (GDP) in the United States ($667 per capita) to 0.41 percent of GDP ($158 per capita) in Canada." > Reducing U.S. spending on a per capita basis to Canada’s level would have saved $158 billion in 2011 They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs. There is substantial waste throughout the system. > Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either. How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs.
      - bhupy 5y ago
        > They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs. They are certainly a "significant" expense, but zeroing it out isn't going to bridge the gap. > How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs. Because they say so: "inpatient and outpatient care, which includes payments to hospitals, clinics, and physicians for services and fees such as primary care or specialist visits, surgical care, and facility and professional fees (see Methods for more details)" The fee-for-service model makes it easy to isolate this amount. For every CPT/CDT code, there's a charged amount, an allowed amount, and a paid amount, and they're specific to the medical procedure.
    - handrous 5y ago
      Combining the two links, it looks like this: > I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Isn't a useful analysis. The admin costs in the US are roughly $937 + ($8,021 * 0.25) = $2942.25—and possibly worse, depending on how much of the stuff from other categories might fall under "hospital budget", though that may be evened out by the difference between budget and revenue (which is the biggest unknown factor here, trying to combine the info from the two links). Hospital admin costs in comparable states seems to be 20% in the worst case plus that $201 of non-hospital admin costs. Worst case, $201 + ($3,602 * 0.20) = $921.40 How is that not a very large part of the difference in costs? It looks like ~40% of the difference in total per capita spending, in fact. I'm sure that's a little off, but where am I going wrong that allows it to become negligible in your analysis?

bhupy 5y ago

Yes, and that's because administrative expenditures from healthcare providers (specifically in claims processing, again I do this every day for a living) amortized per capita like it's done in this study is negligible. There's an upfront cost to setting up EHR systems to facilitate claims processing, and there's a variable cost to handling claims disputes, but they're a drop in the bucket compared to the actual patient costs, which we know to be in the tens of thousands of dollars per capita. There are a bajillion different reasons why raw costs are so high, but admin overhead isn't one of them.

wefarrell 5y ago
That's simply not true. Administrative costs account for 25% of a hospital's budget and 1.43 of GDP: https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us https://www.commonwealthfund.org/publications/journal-articl... In the study that you sent they would be included under the inpatient and outpatient costs rather than administrative.
- bhupy 5y ago
  Yeah but you're mixing up denominators. The question is how you factor in 25% of a hospital's budget to the per capita cost of healthcare provision in the link that I included, which includes all other costs. Those other costs are so high that that even zeroing out the administrative cost doesn't do much to bridge the gap. I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.
  - wefarrell 5y ago
    The link that I spent specifically mentions hospital admin costs per capita and per GDP: >"Hospital administration costs ranged from 1.43 percent of gross domestic product (GDP) in the United States ($667 per capita) to 0.41 percent of GDP ($158 per capita) in Canada." > Reducing U.S. spending on a per capita basis to Canada’s level would have saved $158 billion in 2011 They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs. There is substantial waste throughout the system. > Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either. How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs.
    - bhupy 5y ago
      > They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs. They are certainly a "significant" expense, but zeroing it out isn't going to bridge the gap. > How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs. Because they say so: "inpatient and outpatient care, which includes payments to hospitals, clinics, and physicians for services and fees such as primary care or specialist visits, surgical care, and facility and professional fees (see Methods for more details)" The fee-for-service model makes it easy to isolate this amount. For every CPT/CDT code, there's a charged amount, an allowed amount, and a paid amount, and they're specific to the medical procedure.
  - handrous 5y ago
    Combining the two links, it looks like this: > I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Isn't a useful analysis. The admin costs in the US are roughly $937 + ($8,021 * 0.25) = $2942.25—and possibly worse, depending on how much of the stuff from other categories might fall under "hospital budget", though that may be evened out by the difference between budget and revenue (which is the biggest unknown factor here, trying to combine the info from the two links). Hospital admin costs in comparable states seems to be 20% in the worst case plus that $201 of non-hospital admin costs. Worst case, $201 + ($3,602 * 0.20) = $921.40 How is that not a very large part of the difference in costs? It looks like ~40% of the difference in total per capita spending, in fact. I'm sure that's a little off, but where am I going wrong that allows it to become negligible in your analysis?