Healthcare organizations provide healthcare to the people. These organizations include: acute care facilities, physicians groups, managed care organizations, and others. Health care is the treatment and prevention of illness.
According to research, the following constitute the largest expense categories incurred by healthcare organizations in terms of each dollar spent on health care: hospital care 31%; physician services 21%; pharmaceuticals 10%; nursing homes 8%; administrative costs 7%; pharmacies, manufacturers of equipments used, diagnostic laboratory services, and others 23% (Cohen, et al., 2000).
As shown above, hospitals and physicians spending account for more than half of healthcare dollar. Some researches suggest that this may be due to non-use of some cheaper treatment procedures and overuse of others. Doctor’s wages are very high.
Doctors in the US are paid twice what their counterparts earn in Europe (Cohen, et al., 2000). This is because there is restriction on training of doctors. Meaning, there is a continuous shortage of doctors. This pushes up their wages.
A research conducted in 2002 found that the five most costly conditions constituted a significant percentage of overall cost of health care incurred by health care service organizations. These conditions are: heart complications, cancer, trauma, mental disorders, and pulmonary conditions (Cameron, & Cleverley, 2007).
Around 32.7% of healthcare expenditure goes to treatment and management of these conditions. Heart disease and trauma are ranked as first and second most expensive conditions in terms of total health care spending but with respect to per-person costs cancer was found to be the most expensive.
The medical conditions discussed above constitute chronic conditions. 25% of Americans are reported to have one or more of the five major chronic conditions. These conditions are: mood disorders, diabetes, heart disease, asthma, and hypertension.
According to 1996 Medical Panel Expenditure Survey (MEPS) data 49% of healthcare expenses goes to treatment of these five conditions (Cohen, et al., 2000). Americans aged 65yrs and above consumed 36% of healthcare expenses in 2002 yet they constituted only 13% of the total population in that year.
Cameron, A., & Cleverley, W. (2007). Essentials of Health Care Finance. New York: Jones & Bartlett Learning.
Cohen, J. et al. (2000). Research Findings #12: Health Care Expenses in the United Sates, 1996. Retrieved August 25, 2010, from http://www.meps.ahrq.gov/mepsweb/data_files/publications/rf12/rf12.shtml