Editor's note: This story was the most popular – or perhaps notorious – job-related story of 2010 in Healthcare Finance News. We're reprinting not just the story, but also a sampling of reader reactions to the piece, to give a sense of the importance of the topic.
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 at the Symposium on Payment Solutions for Healthcare Providers and Payers in Las Vegas in January, 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."
Four Reader Reactions
I have been a nurse for over 25 years. My salary maxed out years ago and, in fact, I now make less per hour, not only in real 2010 income but also in terms of inflation, than I did even five years ago. I am not given monetary or even verbal reward for my experience or education. Rather, I am considered expendable – no more than a cog in the corporate wheel that is U.S. health "care." Now there's an oxymoron. It is much less expensive to replace me with a new grad or patient care technician. Those who suffer are the patients, who are tended by inexperienced and overworked bedside nurses who are thrown into the endless cycle of the nursing shortage without time to develop crucial assessment skills.
I wholeheartedly agree with the author about the high cost of medical treatment being mostly due to the outrageously high salary requirements of medical staff. This includes doctors, surgeons and nurses. I'm sorry I can't feel sorry for you (medical staff) when I (a single earner) am making a measly $26,000 a year and can't afford a simple doctor's office visit. I know you guys work hard, study hard and deserve decent pay, but then again … so do I. I'm a professional in my field (NON-medical) but am not making $20.00+ hour pay.
As an executive search consultant specializing in healthcare and the mother of an oncology nurse who cares for very sick and/or dying patients, I cannot disagree more with Mr. Bertschinger's comments. I also cannot imagine a hospital that runs on part-timers (with no or reduced benefits available) who are not paid a living wage, but are expected to be knowledgeable of, and proficient with, the latest technologies, protocols and pharmaceuticals. Who would want a job like that? And who would want to be that person's patient? Not I, in either case.
There has to be an explanation of the reason behind such a monumental disconnect between the thought processes in Mr. Bertschinger's mind and the realties of the bedside delivery of healthcare. No one can take his comments seriously if they have any idea of what is transpiring in the delivery of healthcare today. Technological advances at the time of increasing acuity of patients (are) causing an increase in the need of even more highly trained professional staff. To answer the question posed by the title of this article is to reply "No! Professional staff in today's modern healthcare system (are) underpaid, not overpaid." We need to find better ways to compensate professional staff or we are not going to be able to deliver high quality care.