Financialization of Health Care: The Administrators

Part II

Now, the numbers: the share of the health workforce in administrative and clerical roles went from 18 percent in 1969 to 27.3 percent in 1999. There’s always been administrative work in healthcare, even in the best of circumstances, but look at the trajectory. By 2017, an estimated 5.4 million people were employed in administrative roles in American healthcare, about twice as many as physicians and nurses combined, and the growth has accelerated, with an additional million administrative jobs added since 2001.

Put that as a ratio and it works out to roughly four full-time administrative employees for every physician, and climbing. Think about that. You’re the one providing the care, and there are four people working nine to five in an office somewhere whose full-time job is to monetize what you do.

It’s also expensive. By some estimates, administrative spending accounts for up to 34 percent of national health expenditure, far more than we spend on doctors, somewhere between $600 billion and $1 trillion a year depending on the study. A huge part of that is the insane complexity of our payment system, with more and more people piling on for their cut.

We are, you’ll be shocked to learn, a major outlier internationally. The U.S. spends ten times the OECD average on healthcare administration. Canada, right next door with a very different system, spends around 17 percent on administration, roughly what we spent in 1969, versus our 30-plus percent. In real terms, U.S. administrative spending is about $2,500 per person; in Canada it’s about $500. I find it helps to make this concrete. If I’m personally spending $2,000 on my healthcare and it’s going to these people, rather than to my actual care? That’s a lot of money.

Roughly 20 percent of total healthcare spending is related purely to billing and insurance, which is to say, to insurers and providers fighting with each other. At the individual physician level, the cost of insurance-related administration alone, the person whose job is to get the insurance company to actually pay you, is estimated at $68,000 to $100,000 per physician per year. That’s at least one full salary. And it’s completely out of whack with other highly trained professions. Dentistry, law, accounting: we spend roughly triple what they do on administration. I’ll come back to that.

A reasonable question: if these people are so expensive, why do hospitals keep hiring them? They wouldn’t if it didn’t serve their financial ends. And it does. Hospitals and insurers both find that hiring more people to fight over the money pays for itself. So you get an arms race. The hospital hires more people to clean up billing and upcode; the insurer hires more people to deny more claims; each side builds a bigger structure of administrators who are, quite literally, just fighting each other. None of them are providing healthcare. None of this matters to the mission at all.

And we have proof we can do better within our own borders. The VA, which no one would accuse of being an efficiently run organization, spends about 20 percent on administration, versus 30-plus in the private sector.

Who measures the administrators?

One more piece, which ties back to measurement. A paper from last year uses the term “administrative accountability gap,” and I think it’s exactly right. In this system you, the doctor, are a widget producing healthcare that is then monetized. From the administrative side looking down, what they want from you is more codes, the right codes, and more patients. Much of the measurement imposed on us comes from that administrative arm.

But who’s measuring them? Administrators often have no performance metrics at all, and when they do, a big part of how they justify their continued employment is by hiring more administrators. Promotion in those roles is tied to how many people you supervise, so the way to demonstrate that what you do matters is to do more of it. The system is not generating what we actually care about.

Find Part I of Financialization of Health Care here.