Years ago physicians took the easy way out and allowed non-physicians to manage their profession. Probably seemed like the right thing to do at the time. Let someone else worry about the bottom line. Patient care was less complex. There were adequate resources and everyone was happy. However, this complex model grew and continued to devour health care resources. As resources became more limited the tensions grew those who were once in charge of managing health care finances now were impinging on the practice of medicine. Their solutions were predictable. They showed up in physicians offices on a monthly basis with a profit and loss statement. Physicians were told to see more patients and do more. With no sense of what was best for patients and the profession and with no strong leadership physicians took the path of self-preservation. And now we have a crisis.
In the practice of medicine the most important guiding principle should always be evidence-based practice. Decisions regarding patient management are/should always be based on what the data shows is best. This strategy will optimize patient outcomes and minimize cost. The result is value. With so much at stake shouldn’t the same standards be applied to health care reform and management?
In November 2013 a publication in the Journal of the American Medial Association titled “The Anatomy of Health Care in the United States” provided insight into the demographic and economic realities and trends over the past decades. HCR encourages the interested reader to obtain a copy and read the entire article so that HCR is not accused of “cherry-picking” select pieces of information.
One of the most telling pieces of data is in Figure 2 which looks at trends in health care expenditures by category. From 2000-2011 the category with the highest growth rate is in fact administrative costs with an annual compound annual growth rate of 5.6%. This was followed by hospital and other care facilities at 4.2%, prescription drugs and equipment at 4.0% and professional services at 3.6%. So the sector with the largest growth in cost over the past decade was a sector that had no direct connection to patient care. Was this growth used to make care better or more accessible? Doesn’t seem so. Rather, these data show that we have invested in making the system more complex than it probably needs to be. How efficient do these administrative costs perform? Figure 13A shows the inefficiency of health care in comparison to other industries. Health care utilizes @ 800 revenue cycle FTE’s per $1 billion of revenue. This appears to be anywhere between 4-10x that of other industries. Does this administrative excess adversely affect patient care? Most likely. Figure 13B show that @ 13% of funds spent on physician care is related to billing and insurance related costs. The money in this case isn’t even the biggest problem. Instead, if we currently spend $70B (13% of total costs) on billing and insurance related costs for physician care just think of the wasted time involved. Time that could be utilized toward making care better. Why won’t some leaders acknowledge the administrative cost and burden on health care? Naive? Threatened?
No data is perfect and it should all be scrutinized. Data is by definition historical so one must always incorporate some prognostication and educated guesses into decision-making. In addition one can not be dogmatic and rigid and allowances for situational discretion must me made. But data should always be the starting point. Leaders in the health care industry must address the issue of administrative excess. Not doing so means losing an opportunity for significant savings. It also calls into question priorities and motivations.
It seems that significant cost reductions can be achieved by reducing administrative costs. Eliminating people and processes that have done nothing but sustain the status quo must be a priority. This will result in an entirely new dynamic between providers and administration. Changing the culture is the only pathway to success.