1.4% Of Total US Economic Output Goes To Hospital Administrative Costs

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Compared with other countries, the United States spends significantly more on healthcare's administrative costs.

Just as the American healthcare system overall is the most costly in the world, so is the administrative aspect of the system: hospital administrative costs total about 1.4 percent of the entire U.S. economic output.

From The New York Times:

> Using data from 2010 and 2011, one study, published in Health Affairs, compared hospital administrative costs in the United States with those in seven other places: Canada, England, Scotland, Wales, France, Germany and the Netherlands.


> 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.


> At the low end were Canada and Scotland, which both spend about 12 percent of hospital expenditures on administration, or about half a percent of G.D.P.

But that study only looked at hospitals — physician practices allocate significant sums of money and other resources to administrative efforts as well.

> By one estimate, for every 10 physicians providing care, almost seven additional people are engaged in billing-related activities.


> It is no surprise then that a majority of American doctors say that generating bills and collecting payments is a major problem. Canadian practices spend only 27 percent of what U.S. ones do on dealing with payers like Medicare or private insurers.

Why does the U.S. spend so much on the administrative element of the healthcare system?

> “The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a co-author of the study and a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.”

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