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Looking at Hospital Input Costs

By August 14, 2009November 2nd, 2009Commentary

In all the focus on health care spending there has been relatively little discussion about the role of provider input costs.  To some extent, the prices charged by physicians, hospitals and other health care providers are influenced by what they pay for staff, facilities, equipment, supplies, liability insurance and other inputs they need to render services.  Reducing those input costs, or at least limiting their growth, might help control providers’ prices to patients and payers.  One obscure cost category, but quite sizable, is all the equipment and supplies needed to run the modern hospital.  A New York Times article describes a Senatorial investigation into the purchasing of these items.  (NY Times Article)  The story focuses on group purchasing organizations and skepticism about whether they are delivering the best prices for hospitals, and if not, whether they are actually driving up health care costs.  Whatever the outcome of the investigation, more examination of input costs and how they might be reduced is a welcome approach to overall health spending control.

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