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Measuring the Cost of Bureaucracy in U.S. Healthcare: Closing the Gaps in Care and Spend



In 2014, Health Affairs published a comprehensive study conducted by a team of international health policy experts who analyzed and compared hospital administrative costs across eight wealthy nations: Canada, England, Scotland, Wales, France, Germany, the Netherlands and the United States. It's no surprise the U.S. ranked above all others--with administrative costs accounting for 25.3 percent of total hospital expenditures--when considering that, as far back as 2010, the U.S. spent 17.6 percent of its gross domestic product (GDP) on healthcare. In fact, since the 1980s, the spending gap between the U.S. and other wealthy countries has risen exponentially, with the U.S. Centers for Medicare and Medicaid Services (CMS) now projecting an annual average increase of 5.5 percent between 2018 and 2026. Cutting to the chase, healthcare spend will hit $5.7 trillion and represent nearly 20 percent of the nation's total GDP in less than a decade--and there's not much anyone can do to stop it, though many have tried. To add insult to injury, there is no definitive evidence that the high administrative costs in America translate into better care.

Despite medical breakthroughs and leading-edge technology, U.S. News reports that life expectancy in the U.S. is the lowest among industrialized nations. Thanks in large part to officious laws that prioritize insurance companies, the quality of care is slowly eroding--along with the relationship between patient and doctor. At the root, there is growing consensus among groups like Practicing Physicians of America (PPA) that third-party payers, government bureaucrats and hospital administrators are to be held accountable for "robbing patients of time" with their doctors. Even the CMS recently declared the need to reform its own burdensome regulations that are part of this growing problem after a 2018 report from the American Hospitals Association revealed that activities related to regulatory compliance cost hospitals, health systems and post-acute care providers roughly $39 billion a year (or the equivalent of $1,200 per patient admitted to a hospital) and divert precious time away from direct care.

How did this happen to one of the planet's most progressive societies?

In 2015, A. Barton Hinkle--a senior editorial writer and columnist at the Richmond Times-Dispatch--irreverently described How Bureaucracy and Big Government Ruined American Health Care. It's humorous--until it becomes clear he is not kidding:

"Much of the market is managed by huge, bureaucratic organizations that employ thousands of people to do nothing all day but grind through minutiae. This leads to things like the ICD-10, a diagnostic coding system that governs the classification and reporting of diseases and injuries. With 16,000 different codes, the ICD-10 gets rather specific. Was the patient struck by a turtle? Enter code W5922XA. Was she struck by a sea lion? That's a separate code--W5612XA. Code S30867A covers nonvenemous insect bites to the anus. There's one code for assault with a hockey stick, another for assault with a baseball bat. And then there is V91.07XA, for patients who have been burned by flaming water skis. (Burned by flaming water skis a second time? That's V91.06XD.)"

But that's just the tip of the iceberg. The results of a recent study published in the Annals of Internal Medicine reveal that doctors spend approximately two-thirds of their professional time on arduous amounts of non-clinical activities, from fulfilling EMR (Electronic Medical Records) and EHR (Electronic Health Records) requirements to negotiating with insurers for specific test and diagnostic approvals. The PPA reports that each year, millions of doctor hours are spent on Maintenance of Certification (MOC) tests alone, which provide no educational value yet keep doctors from spending more time with their patients, particularly those practicing in rural areas where the nearest testing center may be hundreds of miles away. It's no wonder some 50 percent of doctors are burned out. But burnout in the medical field has far reaching consequences beyond the individual--and for obvious reasons: When the healers are sick, it threatens the healthcare industry as a whole. In a survey from MDVIP, an overwhelming 83 percent of doctors who responded admit they feel they are spread too thin. In addition to a lack of quality time spent with their patients, 75 percent report they are sleep deprived due to stress. This not only affects their ability to provide high-quality care but also leads to deadly medical errors, which have become the third leading cause of death in the U.S.

Measuring the true cost of a bureaucratic healthcare system may require a new set of data points since it may be decades before the tallies come in unveiling the ultimate cost to human health and wellbeing.

Until then, Americans are held hostage by a system that not only permits monopolistic mergers & acquisitions but also enables insurers to increase healthcare premiums at will. A 2017 analysis conducted by the Department of Health and Human Services (HHS) shows that premiums have doubled for individual health insurance plans since 2013, with the average American now paying nearly $3,000 more for health insurance per year. In the states of Alaska, Alabama and Oklahoma, premiums have tripled. Meanwhile, wait times to see doctors and specialists have soared. Even with the U.S. spending more on healthcare than any other country in the world at $10,348 per person, it still takes on average 50 percent longer to see a family medicine doctor and 30 percent longer (24 days or more) for a patient to get an appointment with a new doctor in comparison to just three years ago, according to a 2017 Merritt Hawkins survey.

Grim as the situation may be, change will come to the U.S.--one way or another. With a greater awareness of the facts and the problems plaguing healthcare, consumers are empowered and well-prepared to not only participate in this growing national debate but also propose solutions to solve unparalleled challenges that have reached a critical mass. As important as it is to understand how the U.S. got to this point, it's time to move forward and find a way to close the gaps.

Robert E. Grant is founder and chief executive officer of CONCIERGE KEY Health, a premier healthcare service that provides on-demand access to top-tier doctor specialists, an assigned healthcare team, dramatic reductions in wait times and the ability to schedule an appointment with the click of a button. An entrepreneur, inventor and investor, he has played a pivotal role for more than 20 years in successful technology and business development in pharmaceutical, medical device and healthcare markets. In addition to founding CONCIERGE KEY, Grant is founder and vice chairman of Alphaeon Corporation, as well as founder, chairman and managing partner of its parent company, Strathspey Crown Holdings, LLC. Most recently, Grant was CEO and president of Bausch+Lomb Surgical, leading the significant growth of its product portfolio. From 2006 to 2010, he served as president of Allergan Medical, leading the $3.2 billion Inamed acquisition and the commercial success of the Botox Cosmetic, Juvederm, Natrelle breast implants and Lap-Band brands. Grant also served as director, board chairman, CEO, president, COO and CFO of Biolase Technology from 2003 to 2006 after holding various senior management positions at Lumenis for six years.

An independent director on several corporate boards including Acufocus, Myoscience and ReShape, Grant has served on several community and civil boards including Make-A-Wish Foundation, Young Presidents Organization, University of California, Irvine (UCI) CEO Roundtable Steering Committee, Chapman Schmid College and both UCI's school of law and Henry Samueli School of Engineering. Grant received his bachelor's degree from Brigham Young University and graduated with honors from Thunderbird School of Global Management, where he earned his MBA. He has also attended the President's Seminar at Harvard Business School and has lived and worked in nine countries, with fluency in Japanese, French, Korean and German.

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