With Healthcare Spending Continually on the Rise, Focus on Cost Drivers to Increase System Efficiency

Healthcare Expenditures are Getting Unwieldy

According to CMS.Gov healthcare spending continues to increase roughly 5% each year in the United States. In 2019 it has reached $3.8 trillion or around $11,500 per person in 2019 which was 17.7% of The GDP.

Breaking these numbers down more to where the money is being spent, the majority is being spent on hospital care (31%) and Physician and Clinical Services (20%). Retail Prescription drug spending was 10%, Other Health, Residential, and Personal Care Services was 5%, Dental Services was 4%, Home Health Care was 3%, Other Professional Services was 3%, Other Non-durable Medical Products was 2%, and Durable Medical Equipment was 2%.

As the healthcare expenses continually grow, it raises serious concerns about the sustainability of the system. Every player in the system will be effected including health care systems and the government. Every player from individuals, families, businesses, insurance companies, and healthcare providers.

With a focus on reducing costs, it will continue to slim the operating margins of healthcare providers. In order to ensure a future, healthcare providers should focus on care associated costs to run more efficiently. Some of the main drivers of cost reduction include:

  • Avoiding medical errors
  • Avoiding hospital admissions and readmissions
  • Decreasing length of stay
  • Increasing hospital workflow efficiency
  • Improving patient engagement in their treatment plan


Both operations and technology should be evaluated to help improve on these cost drivers. For example better communication and big data can help reduce medical errors. Similarly, understanding where the common medical errors are happening and re-training staff can also help reduce medical errors. It should be a continuous improvement effort on both fronts to continue to drive cost reduction.

One Comment

  • Transforming Clinicians into Leadership – Chris Lavrich
    at 11 months ago

    […] Healthcare will continue to transform over the next decade, changing clinicians interactions. In one of last week’s blogs, we talked about some of the care-related cost drivers that will be targeted, all of which focus on […]


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