Advances
Although technological advances have helped with earlier diagnoses and better treatment of disease, factors such as the greater availability of new technology drive per capita expenditures higher (Boddenheimer, 2005b). Treatment for the five most expensive health conditions include septicemia, osteoarthritis, complications of device, implant or graft, newborn care, and acute myocardial infarction (AHA, 2019). These require the use of expensive medications and technologies. While use of some technologies such as electronic record keeping may reduce costs, the presumed success of sophisticated drugs and technologies shapes consumer expectations of what the health care system can deliver (Woo, Ranji, Lundy, & Chen, 2007). Health care consumers, including both patients and providers, also contribute to the cost of health care. These consumers' demands for intense services, despite the lack of definite clinical need, strains health care spending. Mikulic (2019) reports that the number of magnetic resonance imaging (MRI) machines per million population is 37.56 in the U.S., 34.49 in Germany, 29.08 in Korea, and 28.4 in Italy. Yet the United States lags behind these same countries with respect to patient care outcomes (Commonwealth Fund, 2006).
The United States is home to groundbreaking medical research, but so are other countries with much lower cost structures. Any American who has had a hip or knee replacement is standing on French innovation. Deep‐brain stimulation to treat depression is a Canadian breakthrough. Many of the wonder drugs promoted endlessly on American television, including Viagra, come from British, Swiss, or Japanese labs. Overseas, strict cost controls actually drive innovation. Under the pressure of cost controls, Japanese researchers found ways to perform the same diagnostic technique for one‐fifteenth of the American price and still make a profit (Reid, 2009).
Rising Hospital Costs
A large proportion of health care dollars are devoted to hospital care. The Hill‐Burton Act of 1946 funded the development of the nation's infrastructure of hospitals. Today, there are 6,210 hospitals nationwide (AHA, 2019). As technology and scientific knowledge grow and patients live longer, there has been a greater severity of illness in the hospitalized population. Hospital services contribute to the rise in health care costs due to the increased utilization of expensive technologies, high labor costs, the shortage of nurses, rising malpractice premiums, and increased costs of hospitalization. Given the aging hospital infrastructure and increases in hospital reimbursements, future building of new hospital beds will also increase health care costs (Bazzoli, Gerland, & May, 2006) (Table 2.4).
Table 2.4 Cost of Selected Medications
| Drug and doses cost | |
|---|---|
| Accutane Acyclovir‐90 | $1,182.04 $53.33 |
| Ampicillin Demser | $39.30 $20,197.11 |
| Epipen Lipitor‐90 | $388.14 $127.16 |
| Lasix‐40 | $11.55 |
| Lorazepam‐90 | $24.03 |
| Norco Simponi | $114.85 $5,453.81 |
Source: GoodRx. (2019). Prescription Prices, Coupons & Pharmacy Information. Retrieved from www.goodrx.com. October 5, 2019.
Practitioner Availability and Behavior
Defensive medicine and the high cost of medical malpractice insurance all add to increasing physician costs. Malpractice claims in the United States are filed 50% more often than in Great Britain and 350% more often than in Canada (Anderson, Hussey, Frogner, & Waters, 2005). Two‐thirds of claims in the United States are dropped, which results in a similar distribution of claim settlements among these countries. Regardless, the need for medical malpractice insurance to protect American physicians against such claims contributes to the cost of physician care. There are many calls for malpractice reform.
The U.S. has less fewer doctors, especially psychiatrists per capita in the U.S. than there are in most comparably wealthy countries and the U.S. has a similar number of nurses per capita (Sawyer, Sroczynski, & Kaiser, 2016). This shortage is most pronounced in certain practice specialties, for example, family practice physicians and geriatric physicians. Physician shortages are also apparent in rural areas. U.S. physicians earn more than physicians in most countries. A physician specialist who makes $300,000 in the U.S or a family physician whose income is $175,000 per year in the U.S. would, on average, earn approximately 25–50% less in Canada (Eisenberg, 2006) (Table 2.5).
Table 2.5 Health Care Compensation
| Annual salary | |
|---|---|
| Allergan CEO Brent Saunders | $6,624,473 |
| GlaxoSmithKline CEO Emma Walmsley | $7,662,210 |
| UnitedHealth Group CEO David Wichmann | $18,107,356 |
| Cigna CEO David Cordani | $18,944,045 |
| CVS Health CEO Larry Merlo | $21,953,040 |
| Chief Executive Officer (CEO)–Non‐MD | $158,193 |
| Chief Executive Officer (CEO)–MD | $275,123 |
| Director of Human Resources | $96,388 |
| Medical Director | $222,229 |
| Director of Nursing | $84,922 |
| Nurse Practitioner | $93,281 |
| Physical Therapist | $70,568 |
| Cardiologist | $254,945 |
| Anesthesiologist | $291,631 |
| General Surgeon | $270,741 |
| Family Medicine MD | $182,882 |
| Emergency Care MD | $220,642 |
Source: Salary Comparison, Salary Survey, Search Wages. (2019). Retrieved October 5, 2019, from www.payscale.com and Ramsey, L. (2019, May 16). Health care CEOs make as much as $26 million a year. Here's what the industry's top executives earned in 2018. Retrieved from www.businessinsider.com/pharma-and-healthcare-ceo-compensation-2018-2019-4.
Physicians can be extremely persuasive in health care and hospitals as they advise patients where to go for treatment. The physician represents the primary source of patients for most hospitals.