• A reader asks for more details on health care spending

    Reader David States wrote me:

    Re your recent TIE post [on the AcademyHealth blog], would really like to see more focus on how money is being spent. Physician salaries vs. nursing vs. therapy vs. administration vs. capital expenditures vs. insurers, etc. There still seems to be a perception that physician salaries are the major driver of health care spending when in fact that account for maybe 10% of spending. Also do not think most people appreciate the rapid growth in categories such as physical and occupational therapy.

    Would also be worth looking at facility fees over time. As hospitals have bought up physician and therapy practices these fees have exploded.

    Question: One assumes that capital expenditure today will drive other expenditures in the future. How much of a spending increment should we anticipate from the building spree that hospitals have been on for the past decade?

    With a bit of searching on TIE, I can partially answer some of this fairly easily, but not all of it:

    1. Aaron got into physician salaries here, writing that in 2006, physician salaries accounted for $138 billion in health care spending. Yeah, that’s pretty outdated, but I am not aware of any more recent data on TIE.
    2. Here’s a TIE post that puts spending on administration at something like $340 billion per year.
    3. This post has data on private construction spending by hospitals, which is part of capital expenditures.
    4. Several of the specific spending questions can be answered by looking at the National Health Accounts. (OK, that’s not on TIE.)

    I think following these links and the links in them, as well as doing some Googling, one could get pretty far on the basic spending questions. I don’t know about facility fees or about the extent to which capital expenditures drive future expenditures, but I am interested in the answers.

    Readers, can you think of other sources to address these questions? If so, drop them in the comments or email/tweet them to me. Comments open for one week from this posting and for leads only. Having said that, I’ll be off the ‘net for a few days, so comment moderation will be slow unless I can get someone else to do it in my absense.

    @afrakt

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    • One caveat RE: hospital capital spending. Not all of this is related to market forces. California law requires that acute care hospitals comply with strict seismic guidelines that in most cases require complete replacement, and most entities have been on a building binge as a result.