Hospital Administrative Costs

For a certain set of researchers the United States health system just sucks, especially when compared with those in other developed countries and these researchers never tire of dreaming up new reports to demonstrate how awful we are.  The latest installment is carried in Health Affairs and deals with hospital administrative costs.  (HA Article)   Although they claim to be comparing with seven other countries, it really is just five, the components of Great Britain, Canada, France, Germany and the Netherlands.  Knowing these researchers, you can safely assume that the comparators are cherry-picked. In addition, they use their own methods to decide what are administrative costs in the various systems.  The difficulties of getting complete and accurate data in the same functional categories should deter a sensible researcher, but not these ideologues.  Their motto is “garbage in, whatever conclusions I want out”.  According to the study, American hospitals spend 25.3% of their total costs on administration, while Canada spends less than half that.  The authors of course attribute this largely to having to interact with multiple payers.  Not a word is mentioned about the incredible plethora of government regulations and programs imposed on hospitals which drive phenomenal spending.  Every time a readmissions reduction or HAI elimination or value-based purchasing program is put in place, hospitals have to hire more staff, buy more software, etc., all of which drives administrative costs.  Excessive regulation is likely to be causing much more of the growth in hospital administrative costs than is payer interaction.

The authors conclude that the U.S. could save $150 billion a year if it reduced per capita hospital administrative costs to Canadian levels, which as they put it “would best be accomplished through use of simpler and less market-oriented payment scheme.  Of course, Canadians and citizens of other countries aren’t all that happy with their hospitals, and if they can afford it, often come here for care.   For those who aren’t familiar with them, two of the authors, David Himmelstein and Steffie Woolhandler, have for over two decades been strong advocates for complete government-run health care in the United States, in the form of a single-payer system.  In pursuit of that goal they have published a scurrilous series of studies which misleading compare administrative costs for health care in the United States with systems in other countries.  The ideological bias present in their work is apparently undiminished by the astounding success of the government-oriented reform law, which has spent tens of billions of administrative dollars and caused the spending of additional tens of billions of dollars by providers and payers, with no improvement to show for it.  If you run out of toilet paper, this study will do well as a substitute.