3 ms·

> So... where is it if not in the "inpatient and outpatient care" bucket? Sure, maybe minus whatever portion of that represents profit, OK, but that can't be so

by bhupy 5y ago

> So... where is it if not in the "inpatient and outpatient care" bucket? Sure, maybe minus whatever portion of that represents profit, OK, but that can't be so much as to render it anywhere near being negligible. > Or is the 25% figure from the other link off by, oh, 5x or more? No, the 25% figure from your link isn't off at all, it's that you're mixing up denominators. You can't take the 25% figure from hospital costs, the $10,637 from the per capita figure, and then conclude that hospital admin s 25% of $10,637. If you want to insert your number into my number in an apples-to-apples way, you have to actually look what hospitals pay per capita. There's a huge normalization step that you just skipped. Fortunately, your own link does this work: "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." $667 per capita is a drop in the bucket. If I were to guess, the reason why the analysis I linked didn't factor it in was because it doesn't change its conclusion: "The U.S. also spends more on administrative costs, but perhaps not as much as people think, and spends significantly less on long-term care." This is in line with my observation on the ground as well, especially the observation that admin costs typically involve extremely high upfront costs (setting up EHR systems, EDI integrations, book-keeping systems), but lower variable costs from an operating standpoint especially relative to the sheer cost of care itself (doctors, equipment, maintenance, etc etc etc).

handrous 5y ago
> You can't take the 25% figure from hospital costs, the $10,637 from the per capita figure, and then conclude that hospital admin s 25% of $10,637. I didn't—I multiplied 0.25 times the inpatient and outpatient costs, which is why it wasn't even higher (though, when added back with the $937 other-admin costs, it did come very close to 25% of the total, true) > "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." Ah, I see—hospital admin costs, only, plus government and insurance admin costs, being $667 + 937 = $1604, which comes very close to 10%[edit: wow, I swollowed a number when I glanced at these: it's 15%] of total ($10,637) per-capital healthcare expenditure in the US, not ~25%. Left unaccounted for are all non-hospital, non-insurance, and non-government-program admin costs (non-hospital healthcare office & facility admin costs, that kind of thing), and who knows what those are. But with just what's in front of us, ~10%[edit:15%] of the total per-capita cost. So we could save perhaps 6%[edit:10-11%] of total per-capita healthcare spending by bringing those in-line with other developed states. (I did verify with your link's OECD source that all provider administration is included in the prices paid to them—$6,624 does include hospital, doctor's office, outpatient support, et c., admin costs, somewhere in it, so this article's conclusions about the role of admin costs are... not particularly thorough, according to its own source—the above of 10%[edit:15%] is surely closer to correct, though still lower than the actual % of total spending that's admin costs)
- bhupy 5y ago
  > so this article's conclusions about the role of admin costs are... not particularly thorough You seem to be in aggressive agreement with it, though. From your own calculation here, the per capita savings amounts to about ~10%, which isn't a whole lot given that peer nations pay ~50% less all-things-considered (and nowhere close to the 1/3 figure from the original reply). And that's if you were to zero out admin costs, which even among peer nations is impossible to do — it's a real part of COGS no matter what The thesis and conclusion remains: Solving the admin cost problem hardly makes a dent (and don’t get me wrong, it’s certainly worth solving!). The lion's share of the variance in healthcare costs between the US and peer nations is in the price of healthcare, not administrative costs. There are a lot of reasons for this, and it's a whole debate in and of itself.
  - handrous 5y ago
    Several things have excess costs amounting to 5-10% of the total. The whole reason it's so hard to fix this problem is that there isn't one source of excess or unnecessary expenses. Insurance? "Well, sure, but that's only 5-10% of the cost". Other admin? "Well sure, but that's only 5-10% of the cost". Too-high doctor salaries? "Well sure..." and so on. Taking the per-capita admin costs from ~$1600 to a closer-to-normal ~$600 is a major win. It is not negligible. Further, all the data have shown so far is that admin costs aren't under 15% of the total. More categories of admin costs (any from health care providers that aren't hospitals, notably) still lurk somewhere in that inpatient/outpatient care block.
    - bhupy 5y ago
      Actually, the single highest leverage cost reduction measure is to reduce the raw cost of care, which is 5x higher than peer nations. Once you do that, the 5-10% here and there no longer matters. If you spend much time in this industry, you’re bound to hear the phrase “bending the cost curve”, because that’s where the primary focus is right now.

by bhupy 5y ago

handrous 5y ago

> You can't take the 25% figure from hospital costs, the $10,637 from the per capita figure, and then conclude that hospital admin s 25% of $10,637. I didn't—I multiplied 0.25 times the inpatient and outpatient costs, which is why it wasn't even higher (though, when added back with the $937 other-admin costs, it did come very close to 25% of the total, true) > "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." Ah, I see—hospital admin costs, only, plus government and insurance admin costs, being $667 + 937 = $1604, which comes very close to 10%[edit: wow, I swollowed a number when I glanced at these: it's 15%] of total ($10,637) per-capital healthcare expenditure in the US, not ~25%. Left unaccounted for are all non-hospital, non-insurance, and non-government-program admin costs (non-hospital healthcare office & facility admin costs, that kind of thing), and who knows what those are. But with just what's in front of us, ~10%[edit:15%] of the total per-capita cost. So we could save perhaps 6%[edit:10-11%] of total per-capita healthcare spending by bringing those in-line with other developed states. (I did verify with your link's OECD source that all provider administration is included in the prices paid to them—$6,624 does include hospital, doctor's office, outpatient support, et c., admin costs, somewhere in it, so this article's conclusions about the role of admin costs are... not particularly thorough, according to its own source—the above of 10%[edit:15%] is surely closer to correct, though still lower than the actual % of total spending that's admin costs)

bhupy 5y ago
> so this article's conclusions about the role of admin costs are... not particularly thorough You seem to be in aggressive agreement with it, though. From your own calculation here, the per capita savings amounts to about ~10%, which isn't a whole lot given that peer nations pay ~50% less all-things-considered (and nowhere close to the 1/3 figure from the original reply). And that's if you were to zero out admin costs, which even among peer nations is impossible to do — it's a real part of COGS no matter what The thesis and conclusion remains: Solving the admin cost problem hardly makes a dent (and don’t get me wrong, it’s certainly worth solving!). The lion's share of the variance in healthcare costs between the US and peer nations is in the price of healthcare, not administrative costs. There are a lot of reasons for this, and it's a whole debate in and of itself.
- handrous 5y ago
  Several things have excess costs amounting to 5-10% of the total. The whole reason it's so hard to fix this problem is that there isn't one source of excess or unnecessary expenses. Insurance? "Well, sure, but that's only 5-10% of the cost". Other admin? "Well sure, but that's only 5-10% of the cost". Too-high doctor salaries? "Well sure..." and so on. Taking the per-capita admin costs from ~$1600 to a closer-to-normal ~$600 is a major win. It is not negligible. Further, all the data have shown so far is that admin costs aren't under 15% of the total. More categories of admin costs (any from health care providers that aren't hospitals, notably) still lurk somewhere in that inpatient/outpatient care block.
  - bhupy 5y ago
    Actually, the single highest leverage cost reduction measure is to reduce the raw cost of care, which is 5x higher than peer nations. Once you do that, the 5-10% here and there no longer matters. If you spend much time in this industry, you’re bound to hear the phrase “bending the cost curve”, because that’s where the primary focus is right now.