Physicians have borne the brunt of the blame for rising healthcare costs in the U.S. – with some claiming that their income accounts for 80% of healthcare spending. In analyzing actual data, Forbes has debunked that myth, finding that technology, administrative expenses, hospital costs, lifestyle choice and chronic disease conditions have all had greater impacts on rising overall healthcare costs than physicians. The bulk of money spent on procedures goes to hospitals and medical device manufacturers. Forbes notes that “in California, Medicare pays on average $18,000 for a total hip replacement â€“ $16,336 to the hospital and $1,446 to the surgeon.” In fact, the data shows that physicians’ net take-home pay amounts to only 10% of overall healthcare spending, or $24 billion. It is a significant amount, for sure, but compared to the $360 billion spent on administrative overhead, it is minimal. Of that $360 billion in administrative costs, “85 percent of excess administrative overhead can be attributed to the insurance system.”
As for the other significant factors, “there is consensus among experts that technology is the most important driver of healthcare spending increases over time.” A technical review panel advising the office of Medicare and Medicaid estimated that half of growth expenditures are attributable to technology costs. It can costs physicians upwards of $25,000 to install new electronic medical records, and they come with hefty subscription fees.
Administrative expenses and hospital costs are also significant areas of spending. Hospital costs during 2010 in the U.S. constituted $814 billion, or 31.4 percent of all healthcare expenditures. With more physicians obtaining employment at hospitals instead of a private practice, and hospitals merging and purchasing practices, those costs are poised to rise even higher. “One widely reported example found a Nevada patient whose echocardiogram bill came to $373 before the physicians’ practice had been purchased by a hospital system and then increased to $1,605 after the merger.”
Finally, lifestyle and chronic conditions are significant factors in healthcare spending. Chronic diseases are the most common and costly of medical expenses, but are also the most preventable. “According to the CDC’s National Center for Chronic Disease Prevention and Health Promotion, our common, health-damaging but modifiable behaviors â€“ tobacco use, insufficient physical activity, poor eating habits, and excessive alcohol use â€“are responsible for much of the illness, disability and premature death related to chronic disease.” Individuals with three or more chronic conditions generally fall into the costliest 1% of patients, on whom 20% of healthcare spending is placed.
Physicians have been unfairly blamed for rising healthcare costs for years, but the facts about what drives healthcare costs indicate the true culprits are more difficult to control.