Healthcare in the United States is becoming increasingly unaffordable, and one of the contributing factors may be the high salaries earned by healthcare employees.
Speaking recently at the Symposium on Payment Solutions for Healthcare Providers and Payers in Las Vegas, William Bertschinger, divisional chairman of finance at the Mayo Clinic, said healthcare labor costs are driving systemic inefficiency.
"Seventy percent of the high cost of healthcare is due to labor costs," Bertschinger said. "There are too many full-time employees and too many employees paid at too high a rate."
Bertschinger discussed data from the federal Bureau of Labor Statistics and the Kaiser/HRET Survey of Employer-Sponsored Health Benefits that showed the earnings of healthcare workers rising at a faster rate than overall U.S. workers and faster than overall inflation.
For instance, the overall inflation rate in 2008 was 29 percent higher than in 1999. U.S. workers' earnings rose 34 percent over that same period, while healthcare workers' earnings have risen 57 percent since 1999. Bertschinger noted that the upward trend in healthcare salaries has increased since 1999, with healthcare workers generally earning 1-4 percent more per year than non-healthcare workers.
"In order to cut costs in healthcare, we need to reduce the number of full-time employees, reign-in salaries, and stop increasing the fees we charge patients," Bertschinger said.
Healthcare salaries are not usually mentioned as part of the overall affordability equation, Bertschinger said. He noted that even when healthcare executives have made hard decisions to cut full-time employees, the potential savings were not "banked," but were simply redeployed to other areas of the budget.
A big part of the problem is the healthcare revenue cycle itself, Bertschinger claimed. Revenue cycle has the lowest patient satisfaction scores in healthcare, and the highest costs per patient – 70 to 90 percent of which are labor costs.
"The healthcare revenue cycle is not complex, it's convoluted," Bertschinger said. "We spend 5 percent of our total costs – or $120 billion – on the revenue cycle. That's in addition to another $600 billion – or 25 percent – on administration. It's really a sad state we're in."
A sea change in management philosophy is necessary to move healthcare toward systemic affordability, Bertschinger said.
"Leadership is the number one factor in changing the culture of healthcare," he said. "Cost reductions will occur when there are fewer people providing services at fewer facilities, working at a much lower pay scale."