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Reign in healthcare costs: why the US spends so much.

Posted Dec 23 2008 9:35pm

Health Reform Link: Why the U.S. Spends so much money on Healthcare

In an article published by the Wall Street journal, McKinsey & Company reports that the U.S. spends $650 billion a year more on healthcare than you would expect for a country with our GDP. Not surprisingly, they reported "there is clear opportunity for improvement" in our healthcare system. The findings in their report were derived from an examination of the trajectory of US healthcare spending between 2003 and 2006 using data from the Organisation for Economic Cooperative and Development as well as other leading sources.

Among other findings, McKinsey reports that the economic reality of healthcare spending in the US is associated with high levels of outpatient care versus development and use of medical and diagnostic technologies. Outpatient care accounts for a total of $850 billion out of the $2.1 trillion we spend on health care, a staggering 41%.

Jacob Goldstein of the WSJ reported, "In other words, doctors and medical centers get paid more when patients get lots of high-intensity, outpatient care. So — go figure — patients get lots of high-intensity, outpatient care."

At first I had to chuckle at Jacob's cynical humor, but the reality is not so funny. If you consider that 45 million Americans are uninsured, it makes sense that their healthcare would be delivered at an outpatient facility. In addition, I suggest that their healthcare needs in these outpatient facilities are more critical in nature than what is generally provided from a primary care physician's office. If a person or family is uninsured, they may not have regular visits for check-ups, or visits for the general ailments of coughs and colds, or for preventative care. Therefore, when they do seek help, their needs may be more critical (read... higher cost).

There is no clear answer to the dilemma of rising healthcare costs. I suggest that a way to reduce costs is to examine and eliminate inefficiencies in the healthcare delivery process. One such inefficiency, paper-based health records, reportedly accounts for an estimated ~20% of healthcare costs. Using an EHR/EMR has the opportunity to reduce these costs and to improve delivery of patient care.

It's time to get "heads-down" and pick the "low hanging fruit." EHR/EMR technologies have the potential to meet this goal if implemented properly.

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