Health care administration is a source of medical waste

Administration comprises one of the biggest factors for health care waste.

But does health reform do enough to streamline it? It’s doubtful.

Consider the following chart presented by David Cutler, a President Obama advisor:

Health care administration is a source of medical waste

In other words, for every one doctor there are 5 more are employed to do administrative tasks.

And, frankly, it’s ridiculous. As Dr. Cutler says, “There is a lot of money spent doing things that in no other industry do we tolerate.”

Health reformers are hopeful that the money spent for electronic health records and claims processing will cut down on the bureaucracy. But it’s doubtful. Because universal standards for health IT are fragmented and difficult to implement, it’s unlikely that digital systems are a viable answer. If anything, I can see electronic records creating more positions, such as IT support, that will further bloat the administrative side of health care.

This is compounded by the impending transition to ICD-10 — with a 10-fold increase in coding complexity.

I can pretty much guarantee that those training in medical coding or health IT will have secure careers for the foreseeable future. Something to consider as we grapple with double digit unemployment rates.

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  • Ron Bridges

    That may be true but it’s not a justification for Obamacare. It’s only a justification for some kind of reform. Obamacare is a bad bill that needs to be repealed.

  • Dr. Wes

    Say it ain’t so! Patients NEED chart reviews, coding reviews, length-of-stay committees, quality committees, purchasing committies, safety committees, grounds committees, building committees, hall hand-washing monitors and food committees, don’t they? Don’t cut back! More, baby, more!

  • not kevin

    Ron Bridges – in your opinion, which parts of the bill are bad and need to be repealed? The ACP has come out in favor of most parts of the bill.

  • Ben


    While I agree with Culter’s conclusion — a lot of money is spent doing things not tolerated in any other industry — the overall cost structure isn’t quite as simple as the above. At least in this region, Staff RN make 2-3x office staff, primary care docs make 2-3x them, and specialists make 2-5x the primary care guys and gals. I am sure in many hospitals, Staff RN represent the single largest component of payroll.

    Not categorized on the above are all the technicians and technologists. Everyone is a technologist now and every job is going to require a “doctorate” soon. While specialization can create economic value, there is a cost to this hyperspecialization in terms of operating flexibility and market wage pressures. Without ignoring the wage multiples above, are all these intermediaries reducing cost?

    When one thinks about all the machinations that start when a physician orders an ultrasound of X, I wonder about the impact of a physician armed with the new portable ultrasound devices, In addition to all the people bypassed, there’s the opportunity for immediate results, accelerating the clinical protocols, and potentially shorter LOS.

  • Andy

    I don’t see listed in this graph physical therapists or pharmacists. Do health care providers other than doctors and nurses fall into the administration and office support, or do they fall into another category. If the administration is a dumping ground, that could artificially inflate the numbers.

  • Doc D

    Back when reform was being discussed the President made the claim that there would be lower administrative costs under a government plan than there would be in the private insurance market and quoted a study to back it up. I went and looked at the data. After almost thirty years of government service, I could tell right away that the comparison was not fair: the government administrative costs failed to include what we pay public employees in lifetime pensions and subsidized health care, for which there is no comparable cost in the private sector. In fact, in government employment the biggest cost is the pensions. While the article above refers primarily to clinical practice administrative costs, it’s worth noting that the government is even more costly. How many government employees will we need to pay for to manage EHR and IT?

  • Doug Farrago

    They multiply faster than Tribbles. In fact, I would call them Administribbles.

  • Vicki

    My barista at Starbucks has a more direct relationship with me than I have with patients now that patient care has been replaced with chart care, courtesy of hospital and insurance administrators and risk managers. I hope when they get sick they enjoy the loving personal care I give my keyboard and don’t take it personally when I scream and throw my mouse out the window.

  • The Notwithstanding Blog

    I’m with Ben and DocD. The conclusion (too much spent on administration) may be true, but the definition of “administration” is one that’s open to debate. For instance, Wellpoint and other major insurers are reclassifying nurse telephone hotlines and disease management programs as “medical expenses” to meet MLR minimums more easily. Are those expenses really “administrative expenses” in the way we think of them? DocD also points out that single-payer, whose advocates often cite admin costs in support of their arguments, merely shifts some of the administrative cost/personnel into “government” from “health care.” It’s still there.

    Your question of whether reform goes far enough is an interesting one. When reform basically consists of an increase in regulation with which insurers, providers, and patients must comply with, I don’t see how there can even be an initial expectation that it will do *anything* positive on this front.

  • TrenchDoc

    The administration factor is waste for job security. If one faxed request for information is good go ahead and refax it 2 or 3 more time. Endless notes that are nothing more than FYI but are faxed to the office where my personel has to pull it sort it and get my interaction all for no additional reimbursement. Daily 2 inch high stacks of paperwork requesting my interaction on some insurance formulary or prior authorization for whatever drug. The ONLY thing that matters is the Patient-Physician interaction. Anything that does not enhance that interaction is a hinderence.



    Ahhh…and you know the “trouble with Tribbles”

  • Marilyn Blundin

    Well, of course!
    My work, as an administrator, began in 1983. I was an Asst. Mgr.–new product development in a glassware company that folded during the depr…um, I mean recession. I found work as a special assistant to the chairman of an anesthesiology department in a large community hospital closely associated with a university. When I arrived, I asked where are the computers. The glassware inventory was on real time. Computers hadn’t yet arrived to the hospital. The group practice (professional component, Part B) bought an IBM PC, with Ashton Tate dBase, and word processing for $10K. Over time that turned into a network. I learned how to write dbase programming and corroborated with the doctors, nurses, technicians, and hospital administration to write a quality assurance manual that was placed in every anesthetizing location. The dBase program integrated with the operating room dBase program and produced a relational report for the Chairman. That report was well used.
    The word processor saved numerous administrative human resource hours for both medical and administrative workers. That time could be utilized for medicine and patient contact (when human nature didn’t tempt otherwise). Standards were on continuous review and updates were easily distributed. The department was on one sheet of paper so to speak. Both doctors and nurses worked together (albeit begrudging that work on occasions) to develop a functional department. Staff were all in-serviced where to find the manuals of information and what information they contained. This met JCAH and State regs. In fact, JCAH inspectors were impressed that are documents were computerized. We were pleased to have consistent information through the department. That translates to less clinical mistakes.
    The dBase report provided to the Chairman tracked utilization, by OR, personnel, time, breaks in surgical time, late starts, specialty, procedure code, ASA patient status. Quite unfortunately, I termed the report a “product line analysis”. The words stumbled from my mouth as I had a very difficult time to equate operations on human beings as “product line”. The report did, however, successfully support numerous negotiations with financial departments of the hospital, the university, insurance companies and individual surgeons. Later I integrated this with postop rounds and the information collected by a nurse on department QA forms. Sensitive to how information can be misused, the report was termed “Events”.
    The IT world became a nightmare as it grew. Everyone needed the service and it was imperative to be integrated if it was to be efficient and effective, i.e. one clean hand knowing what the other clean hand is doing. The hospital didn’t want the line item on their budget (facilities charges, Part A). Laws made it difficult to design business models that were compliant. It was also clear that IT needed to evolve before it was possible to trust it to patient care—iPhones and Blackberry were only a dream in those days.
    When I was creating these databases of information, the doctors continually reminded me that we were not IBM but a small group practice of doctors. That was until the data (EBM) dispelled philosophical debates of mis-information.
    Mergers and acquisitions became the rage to help defer the effects of a contraction of inefficient utilization of resources and shifting reimbursement patterns. Those were the days when acronyms abounded..HMO, PPO, DRG etc. Medicare no longer paid in full for services provided…this shifted cost onto employers and eventually patients. And people paid because we thought we were the BEST. At least that is what Newsweek was telling us…the top 10 hospitals, the top 10 doctors, the top ten universities. And all the while, we knew it was nothing more than PR with every face that appeared on the cover. This system grew out of control…unchecked by doctors, hospitals, nurses, administrators and especially Wall Street. The incentives allowed for nothing less. And when the house of cards on Wall Street fell down, so did the facade of the health care industry. The industry is our public health, our world health and it needs regulation to the same level as the financial system. Maybe we can get back to medicine now…just as an opinion letter stated in the New England Journal of Medicine those many years ago.
    After 18 years of this work, I left the work in 2002.

    Marilyn Blundin

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