The High Cost of Cure

How a hospital bill grows 17 feet long

Now this breakdown contradicts one of the oldest complaints about hospitals, as quoted in a national magazine: "My work puts me in contact with hotels and hotel management and I know that a good hotel can give you a beautiful room for $30 a day, with three meals, and make a profit and pay taxes. And yet any hospital, which doesn't pay any taxes, operates in the red for $65 a day. I say it must be poor administration." If the analogy were true, the conclusion would be correct. But the hospital is not a hotel -- and in any case, its "hotel" costs are quite reasonable at $6.96 a day; this is approximately half the cost of a decent motel room in Boston. The charge of $5.82 for food, or approximately $1.70 a meal, is equally reasonable, especially when one considers that as a restaurant the hospital must provide an extraordinary range of services, including some eighty special diets.

The true hospital costs -- the expenses incurred in a hospital but not in a hotel -- are, on the other hand, very high. They account for 90 percent of the total per-day room charge. And the question, really, is whether these charges are reducible. No sensible businessman would bother to try to get his hotel costs below seven dollars a day; if there is to be a decrease in costs, it must come from the nonhotel charges.

These in turn largely reflect the increased technological capacity of the hospital. Mr. O'Connor's example is a case in point: most of the tests performed on him were not available in 1925, when he could have had his room for one twenty-fifth of what it cost him today. The maintenance of this new technological capability costs money; and to a large extent, in medicine as in education, law enforcement, sanitation, and a variety of other services you get what you pay for. If you are going to enter a high-quality acute-care facility which has six employees (most of them nonphysicians) for every patient, and if you are going to pay these employees a decent wage, then your care will be expensive. (This is sometimes easier to see if it is taken out of the hospital setting. If a man had to hire six secretaries for an eight-hour day, at $2.50 an hour, it would cost him $144 a day. If a man had to hire two gardeners at $4 an hour, for a single eight-hour day, it would still cost him $64 a day.) If you are going to purchase technological hardware, maintain it, and keep it up to date, this costs money. If you are going to keep the hospital in continuous operation 24 hours a day, 365 days a year, this costs money.

All this becomes clear in the instance of a simple procedure such as a chest X ray. A private radiologist in his office will perform this for you at one half or one third of what the hospital charges. His charge largely reflects the fact that his unit can operate on an eight-hour day and a forty-hour week; other costs, such as equipment and supplies, are the same. In medicine today, as in every other industry, people are more expensive than anything else. Sixty-three percent of the hospital budget now goes to the salaries and benefits of employees. And much of the rise in hospital costs is directly attributable to the demand of these employees that they not be forced personally to subsidize the health business by accepting wages incommensurate with similar jobs in other industries. Their demands are justified; most of them are still underpaid. Their salaries will increase in the future.

One cannot, however, fairly claim that hospitals are superbly efficient. Especially in a teaching hospital, attention to the medical, nonhotel costs is less central than one would like to see. One can argue endlessly about whether too many tests are ordered. But certainly, when physicians who order these tests don't know what patients are charged for them, eyebrows must go up. Doctors tend to operate on a "spare-no-expense" philosophy, which will, eventually, need to be tempered.

But more fundamentally, the present cost structure of the hospital seems to lead to a rather old-fashioned conclusion: no one should go there unless he absolutely has to. If a diagnostic procedure can be done on an ambulatory, outpatient basis, it should be; if a series of tests and X rays can be done outside the hospital, they should be. No one should be admitted unless his care absolutely depends upon being inside the hospital; no one should be admitted unless he requires the hour-to-hour facilities of the house staff, the nursing staff, and the laboratories.

For decades, admission to the hospital was necessary because there was no other facility available. For a large segment of the population, care was either given in the hospital or not at all; and the hospital's clinic system was a poor compromise, with hordes of patients being brought in to wait hours -- sometimes literally days -- to have relatively brief tests performed.

There is hope that satellite clinics will help solve the problem; one study of a satellite clinic in Boston reported that there were fewer hospital admissions as a result of the clinic's work. In any case, alternative facilities must be found, because it is unlikely that hospital costs will ever go down. The best anyone can hope to do is stabilize them somewhere in the neighborhood of $100 a day. This makes the hospital an expensive place; but it has its uses, and indeed will be an economically tolerable place, if it is used appropriately.

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