What you need to know about the forces reshaping our industry.


September 30, 2019

NYT op-ed: In the spending debate, hospitals get an undue pass

Daily Briefing

    While politicians often blame drugmakers and insurers for high U.S. health care prices, "hospitals are by far the biggest cost in our $3.5 trillion health care system," Elizabeth Rosenthal, a physician and editor-in-chief of Kaiser Health News, writes in a New York Times opinion piece.

    Oct. 7 webinar: How nurse leaders can identify cost saving opportunities

    Are US hospital prices too high?

    Rosenthal cites a Rand report that found spending on hospitals accounts for 44% of personal expenses for privately insured patients. She also cites a report from earlier this year that found hospital prices for inpatient care increased by 42% from 2007 to 2014 for inpatient care.

    As with prices for care delivered in non-hospital settings, hospital prices are much higher in the United States than in other countries, Rosenthal writes. For example, the average cost of a hospital stay in the United States was $5,220 per day in 2015, compared with $765 per day in Australia.

    So why, despite these relatively high reimbursements, do so many U.S. hospitals operate on thin margins? Rosenthal argues "that is in part a choice, resulting from extravagance."

    When health systems make money, Rosenthal writes, they often reinvest it in their systems—sometimes in ways that don't clearly relate to clinical excellence. "They build another cancer clinic, increase CEO pay, buy the newest scanner (whether it is needed or not) or install spas, and Zen gardens," Rosenthal writes.

    "Compared with their European counterparts, some American hospitals resemble seven-star hotels," Rosenthal writes. "And yet, on average, the United States doesn't have better outcomes than other wealthy nations. By some measures—such as life expectancy and infant mortality—it scores worse than average."

    Rosenthal acknowledges that some U.S. hospitals, especially in rural settings, will inevitably struggle in the current economic environment. But even so, she argues, "if hospitals were paid less via regulation or genuine competition," many would make different decisions about their technology, without negatively impacting Americans' health outcomes.

    Many politicians hesitate to target hospitals, Rosenthal argues

    Yet politicians often are hesitant to talk about hospitals' role in driving health care spending, Rosenthal argues. One reason, she writes, is that "virtually every congressman and every mayor of every large city has a powerful hospital system in his or her district."

    Further, public perception of hospitals is often very positive. "It's easy to get voters riled up about a drugmaker in Silicon Valley or an insurer in Hartford," Rosenthal writes. She adds, "It's much riskier to try to direct their venom at the place where their children were born; that employed their parents as nurses, doctors and orderlies; that sponsored local Little League teams; that was associated with their Catholic Church."

    There's also the money that comes from hospital trade groups, medical centers, and employee donations to political campaigns, Rosenthal writes. For instance, she notes that in 2018, PACs and individuals that were associated with the Greater New York Hospital Association, donated $4.5 million to the Democrats' Senate Majority PAC and $1 million to their House Majority PAC.

    Despite all of these factors, Rosenthal argues it's time for lawmakers to pay more attention to high hospital spending. She writes, "[O]ur elected officials need to address the elephant in the room and tell us how they plan to rein in hospital excesses" (Rosenthal, New York Times, 9/1).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.