HOSPITAL ADMINISTRATIVE COSTS IN THE UNITED-STATES

In a study of administrative costs in US hospitals, Woolhandler et al. reviewed 1990 Medicare cost reports from 6400 hospitals. The intent o f this study was to determine the validity of previous administrative cost estimate studies in Californian hospitals, which were extrapolate d nationwide. The study found that hospital administrative costs range d from 20.5 (in Minnesota) to 30.6% (in Hawaii) of each hospital's spe nding. Furthermore, the investigators found that these administrative costs did not vary according to the level of managed care penetration in a particular US state. Using a health maintenance organisation (HMO ) enrolment rate of 20% as the median, the study found hospital admini strative costs to be similar to states with an HMO enrolment rate of < 20%. The authors concluded that reducing hospital administrative costs to the Canadian level (9 to 11% of total hospital spending) would res ult in annual savings of $US50 billion. Thus, the authors suggest that if administrative costs are high, US healthcare reform should follow a system similar to that used in Canada.