US Hospitals Spend At Least Double Other Countries on Billing and Administration

Steffie Woolhandler MD MPH Professor at the School of Public Health and Hunter College, CUNY; Professor of Medicine Harvard Medical School Cambridge HospitalMedicalResearch.com Interview with:
Steffie Woolhandler MD MPH
Professor School of Public Health and Hunter College, CUNY;
Professor of Medicine
Harvard Medical School Cambridge Hospital

Medical Research: What are the main findings of the study?

Dr. Woolhandler: In 2011, U.S. hospitals spent $215 billion on
billing and administration. Meanwhile, other
countries spent far less. None of the other
seven countries we studied spent even half as
much as the U.S., and they all have modern, high
quality hospitals. While we spent nearly
$700 per capita on hospital paperwork, Scotland
and Canada spent less than $200. This means
that if U.S. hospitals ran as efficiently as
Canada’s, the average family of four would save
$2,000 annually on health care.

Medical Research: How was the study done?

Dr. Woolhandler: We put together an international team of hospital
experts to obtain official hospital cost data
from eight nations. We then aligned the hospital
accounting categories to do an apples to apples
comparison of hospital administrative spending in
8 nations: the U.S., Canada, England, Scotland,
Wales, the Netherlands, France and Germany.

Medical Research:Were any of the findings unexpected?

Dr. Woolhandler: The conventional wisdom is that market breed
efficiency. We found the reverse to be true.
Nations with the most market oriented systems,
like the U.S. and increasingly the Netherlands,
had much higher administrative costs that
countries with single payer systems, like Canada
and Scotland. Another unexpected finding was
the explosion of administrative spending by US
hospitals in the past decade. In 2000 hospital
administration consumed 0.98% of total US GDP.
By 2011, hospital administration costs had more
than doubled in inflation adjusted dollars, and
were consuming a whopping 1.43% of
GDP. Meanwhile, hospital administrative costs were falling in Canada.

Medical Research: What should clinicians and patients take away
from your report?

Dr. Woolhandler: The major take-away point is
that doctors and patients need to be working to
go beyond Obamacare to a single paper
reform. The current payment systems is wasteful
because every hospital has to negotiate rates
schedules with hundreds of different insurance
plans, each with its own set of billing and
documentation requirements. And hospitals
need staff to collect deductibles, co-payments
and co-insurance from every patient who comes
through the door. Single payer systems (like
Canada’s or Scotlands) can give hospitals
simple lump sum budgets, the way we fund local
fire houses. And like fire departments
hospitals in single payer systems don’t need to
collect from each victim of misfortune. In
Scotland, even hospital parking is free.

Medical Research: What recommendations do you have for future
research as a result of this study?

Dr. Woolhandler: Research is  needed on how we can minimize
administrative waste in payment of hospitals, physicians, and
other health providers, and use the savings to
provide excellent care to every American.

Citation:

A Comparison Of Hospital Administrative Costs In
Eight Nations: US Costs Exceed All Others By Far:
David U. Himmelstein, Miraya Jun, Reinhard Busse, Karine Chevreul, Alexander Geissler, Patrick Jeurissen, Sarah Thomson, Marie-Amelie Vinet, and Steffie Woolhandler
Health Aff September 2014 33:91586-1594; doi:10.1377/hlthaff.2013.1327