The United States continues to spend a greater percentage of its wealth on health care than any other industrialized nation. There is widespread agreement that there are areas in which the US can better manage health care costs. In 2011, US health care employed 15.7% of the workforce, with expenditures of $2.7 trillion, doubling since 1980 as a percentage of US gross domestic product (GDP) to 17.9%. Yearly growth has decreased since 1970, especially since 2002, but, at 3% per year, exceeds any other industry and GDP overall.
In every other industry, knowing the true costs of providing products or services is inherent to the business. Health care has been an anomaly. While recent public attention has been drawn to the issue of the high “costs” of health care, what is being referred to are actually the charges, not the true costs.
Charges vs Costs in Health Care
The relationship between charges and costs is rooted in Medicare estmates… (fill in details here).
Recently, considerable public attention has been drawn to the variability of and high charges for health care. (Time’s Bitter Pill, http://tinyurl.com/key2w3c
[An article in the business section of Wednesday’s Washington Post reported, “Medicare may be best known for paying the medical bills for millions of people 65 and older, but recent studies show it plays another gargantuan role in American health care: It helps determine prices for everyone.” The authors further argued, “The government may be spending billions of dollars more than necessary for some products and services. Moreover, the influence of Medicare prices means that those faults may be replicated throughout U.S. health care.” http://tinyurl.com/key2w3c]
(other refs: New York Times editorials and other publications in wake of Bitter Pill, Plus WSJ piece 2/23/14 How to Bring the Price of Health Care into the Open)
A number of authors have drawn attention to the need to know the true costs of care in health care, both in order to manage rising costs, as well as to move from volume-driven to value-driven systems. (Refs:
How to Solve the Cost Crisis in Health Care HBR Sept 2011, p 3-18 #costs,
The Strategy That Will Fix Health Care HBR Oct 2013, p2-19
“Health Care Costs in US vs Europe” Khan Academy 14:33 http://www.youtube.com/watch?v=6YU9HVS2GT0
A discussion about US health care costs
Accurate cost accounting aims to assign the true costs of each component of care. Any more here?
VDO background and methodology from Ken after paper is published.
Salt lake tribune piece December 2013 about VDO http://www.sltrib.com/sltrib/news/57087681-78/care-costs-health-cost.html.csp
Time-Driven Activity-Based Costing (TD-ABC)
Using an approach widely applied in most other industries (Kaplan TD-ABC book published early 2000’s), Robert Kaplan has developed a TD-ABC approach in health care.
Refs: Kaplan TDABC piece in HBR 2004 http://hbr.org/2004/11/time-driven-activity-based-costing/ar/1 #costs
WSJ piece from 2/14 http://online.wsj.com/news/articles/SB10001424052702304888404579379122507671850
Several Harvard Business School case studies elaborate on the cost-accounting method in health care:
Boston Children’s Hospital
and a video alluding to the Mayo experience with TD-ABC http://www.youtube.com/watch?v=YEAHcJIPVjY&feature=youtu.be (Noseworthy Mayo) from 10-14 min marks
The algorithm for TD-ABC:
Interim Report of the Committee on Geographic Variation in Health Care Spending and Promotion of High-Value Health Care: Preliminary Committee Observations . Washington, DC: The National Academies Press, 2013.
National Research Council. Core Measurement Needs for Better Care, Better Health, and Lower Costs: Counting What Counts: Workshop Summary. Washington, DC: The National Academies Press, 2013. http://www.nap.edu/catalog.php?record_id=18333
National Research Council. Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Washington, DC: The National Academies Press, 2013. http://www.nap.edu/catalog.php?record_id=13444
Young, Pierre L., Olsen, LeighAnne " Front Matter ." The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press, 2010 .
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Institute of Medicine Widget: Cost of Health Care slide show: http://resources.iom.edu/widgets/vsrt/healthcare-waste.html
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Health Services Research Information Central (HSRIC)
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Kaiser Family Foundation (http://www.kff.org ) analysis. Visualizing Health Policy: Health Care
Costs. Original data and detailed source information are available at http://facts.kff.org/jama_09261
The September 2012 Visualizing Health Policy infographic examines health costs in the United States, including how costs have changed, how they compare to some other countries, and how they impact American families.
Health Services Research (HSR) PubMed Queries
This page provides specialized PubMed searches on healthcare quality and costs.
After running one of these searches, you may further refine your results using PubMed's Filters feature.
Results of searches on this page are limited to specific health services research areas (see definitions).
For comprehensive searches, use PubMed directly.
Additional PubMed search filters are available, including a filter for Systematic Reviews.
Costs category: Defined as content pertaining directly to the costs or financing of a health care issue.
No methodologic criteria applied.
Economics category: Defined as content pertaining directly to a comparison of the cost and effects of at least two different forms of service provision. Methodologic criteria for this category: Question is a comparison of alternatives; alternative services or activities are compared on outcomes produced (effectiveness) and resources consumed (costs); effectiveness and cost estimated are based on individual patient data; results are presented in terms of the incremental or additional costs and outcomes of one intervention over another; sensitivity analysis is performed if there is uncertainty. Evidence of effectiveness must be from a methodologically rigorous study of diagnosis, treatment, quality improvement, or a systematic review article that involved real patients. NOTE: Economics is a subset of the Costs category.
Joshua Sharfstein, MD; Phil B. Fontanarosa, MD, MBA; Howard Bauchner, MD. Critical Issues in US Health Care; Health Care on the Edge.. JAMA. 2013;310(18):1945-1946. doi:10.1001/jama.2013.282124.
Hamilton Moses III, MD; David H. M. Matheson, MBA, JD; E. Ray Dorsey, MD, MBA; Benjamin P. George, MPH; David Sadoff, BA; Satoshi Yoshimura, PhD. The Anatomy of Health Care in the United States. JAMA. 2013;310(18):1947-1963. doi:10.1001/jama.2013.281425.
Joseph P. Newhouse, PhD; Alan M. Garber, MD, PhD. Geographic Variation in Health Care Spending in the United States; Insights From an Institute of Medicine Report. JAMA. 2013;310(12):1227-1228. doi:10.1001/jama.2013.278139.