What Are a Hospital’s Costs? Utah System Is Trying to Learn
New York TimesOnly in the world of medicine would Dr. Vivian Lee’s question have seemed radical. She wanted to know: What do the goods and services provided by the hospital system where she is chief executive actually cost?
Most businesses know the cost of everything that goes into producing what they sell — essential information for setting prices. Medicine is different. Hospitals know what they are paid by insurers, but it bears little relationship to their costs.
No one on Dr. Lee’s staff at the University of Utah Health Care could say what a minute in an M.R.I. machine or an hour in the operating room actually costs. They chuckled when she asked.
But now, thanks to a project Dr. Lee set in motion after that initial query several years ago, the hospital is getting answers, information that is not only saving money but also improving care.
Inpatient hospital costs account for nearly 30 percent of health care spending in the United States and are increasing by a little less than 2 percent a year, adjusted for inflation, according to the federal Agency for Healthcare Research and Quality.
The cost issue has taken on new urgency as the Affordable Care Act accelerates the move away from fee-for-service medicine and toward a system where hospitals will get one payment for the entire course of a treatment, like hospitalization for pneumonia. Medicare, too, is setting new goals for payments based on the value of care.