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10 Drivers of Healthcare Costs
Fee-for-Service
  1      Reimbursement
The Fee-for-Service (FFS) model
of paying for medical services
creates an incentive to perform
a high volume of tests and
services, regardless of their
necessity.
Fragmentation of
    2       Care Delivery
Providers lack an incentive and
the means to coordinate with
other providers when treating
patients. This fragmentation of
care leads to inefficiencies, over-
treatment and greater potential
for medical errors.
3      Administrative Burden
The complexity of the US
healthcare system produces a
heavy administrative workload
and demand for resources that
leads to higher overall costs.
4      Population Aging
The aging of the baby boomer
population combined with
longer life spans means that
there will be more elderly to
care for. The elderly require
costly resources and care
including inpatient hospital
stays, hospice care, outpatient
care, home health and nursing
facility care.
Chronic Disease &
  5      Lifestyle Choices
Chronic diseases (many of
which are preventable) utilize
high volumes of a complex
mix of services, resulting in
about 84% of US healthcare
expenditures.
Utilization of Medical
  6       Technology
Utilizing new technology when
there are alternatives that are
less costly and equally effective
drives up healthcare spending.
Advanced technology’s true
value is realized in its ability to
improve patient outcomes and
efficiency.
Lack of Transparency in
   7      Cost & Quality
Information on cost and quality
of medical services is lacking or
not easily available to health-
care consumers. This has
adverse effects on competition,
cost and quality of services.
Market Competition &
  8      Consolidation
Consolidation of healthcare
providers and organizations can
sometimes lead to competition
being drastically reduces and
higher prices being charged
for medical services.
Medical Malpractice
  9       Fraud & Abuse
The litigious society in which
we live combined with the
practice of defensive medicine
ends up costing consumers
billions in healthcare costs.
Fraud is also rampant in our
healthcare system at a cost of
$80 billion per year.
10       Primary Care Shortage
The shortage of primary care
physicians drives patients to
specialists or worse, to emer-
gency departments for their pri-
mary care needs. Those who do
not utilize primary care may
miss out on detecting and
treating a condition before it
becomes a serious problem.
For More Information Visit
payerfusion.com/ceos-blog

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10 Drivers of Healthcare Cost

  • 1. 10 Drivers of Healthcare Costs
  • 2. Fee-for-Service 1 Reimbursement The Fee-for-Service (FFS) model of paying for medical services creates an incentive to perform a high volume of tests and services, regardless of their necessity.
  • 3. Fragmentation of 2 Care Delivery Providers lack an incentive and the means to coordinate with other providers when treating patients. This fragmentation of care leads to inefficiencies, over- treatment and greater potential for medical errors.
  • 4. 3 Administrative Burden The complexity of the US healthcare system produces a heavy administrative workload and demand for resources that leads to higher overall costs.
  • 5. 4 Population Aging The aging of the baby boomer population combined with longer life spans means that there will be more elderly to care for. The elderly require costly resources and care including inpatient hospital stays, hospice care, outpatient care, home health and nursing facility care.
  • 6. Chronic Disease & 5 Lifestyle Choices Chronic diseases (many of which are preventable) utilize high volumes of a complex mix of services, resulting in about 84% of US healthcare expenditures.
  • 7. Utilization of Medical 6 Technology Utilizing new technology when there are alternatives that are less costly and equally effective drives up healthcare spending. Advanced technology’s true value is realized in its ability to improve patient outcomes and efficiency.
  • 8. Lack of Transparency in 7 Cost & Quality Information on cost and quality of medical services is lacking or not easily available to health- care consumers. This has adverse effects on competition, cost and quality of services.
  • 9. Market Competition & 8 Consolidation Consolidation of healthcare providers and organizations can sometimes lead to competition being drastically reduces and higher prices being charged for medical services.
  • 10. Medical Malpractice 9 Fraud & Abuse The litigious society in which we live combined with the practice of defensive medicine ends up costing consumers billions in healthcare costs. Fraud is also rampant in our healthcare system at a cost of $80 billion per year.
  • 11. 10 Primary Care Shortage The shortage of primary care physicians drives patients to specialists or worse, to emer- gency departments for their pri- mary care needs. Those who do not utilize primary care may miss out on detecting and treating a condition before it becomes a serious problem.
  • 12. For More Information Visit payerfusion.com/ceos-blog