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Explaining U.S. hospitals’ sky-high administrative costs

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A report from the Commonwealth Funds looks at U.S. hospital’s astronomical administrative costs. Among the observations in the report, headlined “A Comparison of Hospital Administrative  Costs in Eight Nations: U.S. Costs Exceed All Others by Far”:

“Administrative costs account for 25 percent of total U.S. hospital spending, according to a new study that compares these costs across eight nations. The United States had the highest administrative costs; Scotland and Canada had the lowest. Reducing U.S. per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011.”

“In countries where hospitals receive global, lump-sum budgets, garnering operating funds requires little administrative work. Per-patient billing, on the other hand, requires additional clerical and management staff and special information technology systems. In countries where there are multiple payers, as in the United States, billing is even more complex, since each hospital must negotiate payment rates separately with each payer and conform with a variety of requirements and billing procedures. Also factoring into administrative costs is how hospitals obtain their capital funds. The combination of direct government capital grants and separate global operating budgets—the approach taken in Canada and Scotland—was associated with the lowest administrative costs.”

To read the report, please hit this link.



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