Public Policy

Hospitalists and cost control in the U.S. health care system


The rising cost of care has been a major concern in the U.S. health care system. In 1990, about $714 million was spent on health care. In 2010, the cost had risen exponentially to about $2.6 trillion.1 An estimated $750 billion dollars is attributed to health care waste.2

Health care waste includes spending on laboratory testing, diagnostic imaging, procedures or other treatments. Below is a list of the various sources that contribute to health care spending waste:2

1. Unnecessary Services ($210 billion)

2. Excessive Administrative Costs (190 billion)

3. Inefficient Service Delivery ($130 billion)

4. Overpricing ($105 billion)

5. Fraud ($75 billion)

6. Treatment for services that could have been prevented ($55 billion)

Dr. Olugbenga Arole

Dr. Olugbenga Arole

The patient and payers view cost as the price that is paid for a service rendered. It includes charges for such services as prescriptions and doctor visits, as well as the premiums paid for health insurance. The provider views cost as the price for producing health services, such as rent, salaries, and equipment costs. From the government perspective, health care costs includes what the nation spends on the delivery of health care. It is a reflection of what providers charge and how much is utilized by consumers.

Reducing the cost of care

The predominant fee-for-service method of reimbursement does not encourage hospitals or providers to try to control areas of waste. One strategy that puts pressure on the providers of health care to control these areas of waste is the bundled payment system. Bundled payment systems deter unnecessary testing and procedures and encourage care coordination between care providers to promote efficiency.

As hospitalists, we play a key role in the bundled payment arena. Hospitalists are strategically placed to ensure that each episode of care is provided in the most cost-efficient way possible without sacrificing quality.

Training about the evidence supporting bundled payments can be incorporated into medical school and the residency curriculum. Hospitalists can serve as educators for trainees regarding the benefits of bundled payments. This will help drive sustainability by making sure new doctors entering the health field are already equipped with knowledge about bundled payments and their advantages.

Hospitalists can also help spur innovation by engaging with hospital leadership to develop new bundled systems. Payment incentives to organizations that participate will help to drive hospitalist engagement. Hospitalists can also advocate for the development of a risk adjustment system to ensure that each patient’s severity is reflected in the payment. This will allow for more buy-in by hospitals and providers.

Improving the quality of care

The Institute of Medicine published a report that made recommendations for improving the quality of the U.S. health care system by identifying six dimensions that need to be addressed:

1. Safety

2. Effectiveness

3. Patient-centeredness

4. Timeliness

5. Efficiency

6. Equity

The Value Based Purchasing program aims to address these dimensions. The fee-for-service system does not provide an incentive to provide quality care, similar to the way it does not drive cost-conscious care. By linking reimbursement to quality care, hospitals and providers have a significant incentive to ensure that their patients receive high quality care. The passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is another step in the direction of rewarding providers for quality of care rendered, not just quantity.

Role of hospitalists

Again, hospitalists should serve as educators about the importance of value based purchasing on quality outcomes,\ and its potential for cost savings through rendering appropriate and effective care.

Hospitalists should advocate for expanding value based purchasing across all payers. This will encourage providers to treat all their patients the same, with the expectation of improving quality of care for all patients and not just a limited insurance pool.

Hospitalists can also advocate for the utilization of the same measure for determining quality across all payers. This will allow for more efficient administrative efforts by eliminating the time used to report different measures to different insurance companies.

Unfortunately, the digital era has not made the same advances in the field of medicine as it has in other areas of life. As hospitalists, our clinical perspective puts us in a position of leadership in the area of informatics. We are uniquely qualified to exploit the power of the hospital’s information technology service and push it to its full potential.

Dr. Arole is chief hospitalist, Griffin Faculty Physicians, at Griffin Hospital in Derby, Conn.


1. The Healthcare Imperative: Lowering Costs and Improving Outcomes – Workshop Series Summary. 2011 Feb 24. The Institute of Medicine.

2. Health Affairs Policy Brief; Reducing Waste in Health Care.

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