Savings Possible as American Hospital Bill Approaches $800 Billion

The nation’s hospital bill, representing 39 million hospital stays, totaled more than $790 billion in 2004, according to a new report from the U.S. Department of Health and Human Services’ (HHS) Agency for Healthcare Research and Quality (AHRQ). At the same time, the National Scorecard on U.S. Health System Performance, the first-ever comprehensive report measuring and monitoring healthcare outcomes, quality, access, efficiency and equity, indicates that just closing the gaps between actual and achievable performance could result in savings of between $50 and $100 billion annually.

The AHRQ report found that nearly $500 billion, or 60 percent of the national hospital bill went to the federal and state governments for Medicare and Medicaid patients. Reducing the 30-day readmission rates, which range from 14 to 22 percent across regions, to levels achieved in top performing regions, would save $1.9 billion annually, according to the Scorecard.

The AHRQ report also indicates that:

  • One-fifth of the national hospital bill was for treatment of five conditions: coronary atherosclerosis, mother’s pregnancy and delivery, newborn infants, acute myocardial infarction, and congestive heart failure. Hospital stays for coronary atherosclerosis incurred the highest charges ($44 billion); mother’s pregnancy and delivery had the second highest charges ($41 billion).

  • Medicare, which provides insurance for the elderly, had pneumonia and osteoarthritis among its top five most expensive conditions. Medicaid, which covers certain groups of low-income patients, had treatments for pregnant mothers and their deliveries, plus care of newborn babies, as its two most expensive types of hospital stays.

  • Medicaid’s top five most expensive conditions also included pneumonia, schizophrenia, depression and bipolar disorders.

  • Private insurers’ biggest bills were for pregnancy and delivery, care of newborn infants, hardening of the heart arteries, heart attack and back problems.

  • Brain trauma and stroke were among the expensive conditions billed uninsured patients.

The data used in The National Hospital Bill: The Most Expensive Conditions, by Payer, 2004, are from the AHRQ’s Healthcare Cost and Utilization Project -- the nation’s largest source of statistics on hospital inpatient care for all patients, regardless of type of insurance or whether they were insured.

Not all healthcare expenditures occur in hospitals, however. Many occur in out patient facilities such as physicians’ offices, dentists’ offices and optometrists’ offices, as well as others. In a study released earlier this year, AHRQ reported that insurers, government agencies and patients spent a total of $896 billion on healthcare in 2003. According to the 2003 data, 68 percent of the population spent an average of $663 annually or a total of $130.7 billion on visits to physicians’ offices and 40 percent of the population spent an average of $417 annually or a total of $48.6 billion on visits to the dentists’ offices (excluding orthodontists). Among out-patient services, the largest average annual expenditure was orthodontists, with only 2.2 percent of the pollution spending an average of $1,646. Physical or occupational therapists followed, with 2.6 percent of the population spending an average of $1,140 annually. The lowest average annual expenditure went to optometrists, with 6 percent of the population spending an average of $119 annually.

The Scorecard awards the U.S. a total overall score of 66 out of a possible 100, with scores on efficiency being particularly low. Quality of care is highly variable, too, being delivered by a system that is often poorly coordinated, which drives up costs and puts patients at risk. In addition, the high costs of treating patients with multiple chronic diseases should serve as a reminder that a high proportion of national healthcare expenditures are attributable to a minority of very sick patients. As the nation’s population ages, the importance of creating or implementing payment policies supporting integrated, team-based approaches to managing patients with multiple complex conditions increases. The resulting picture is not only one in need of transformation, but, sadly, one of missed opportunities at every level.

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