Diagnosis-related groups

Question

What will be an ideal response?

Answer 1

For hospitals, a rapid rise in the cost of supplies and equipment--including large capital investments such as magnetic resonance imaging (MRI) scanners, as well as more mundane items such as dressings and surgical gloves--has been a factor. Labor costs for hospitals have been increasing rapidly, as many professional and nonprofessional employees unionize to bargain for higher wages. Further, good medical care is labor intensive, and although technology can make some aspects of care more efficient, patients value personal contacts with health providers. There also may be too many hospital beds for the number of available patients. Empty hospital beds imply capital costs and even some running costs that must be spread among the patients who do occupy beds. As health insurers (including government) attempt to constrain their costs by limiting hospitalizations, the hospitals find their average costs rising. The same consideration applies to overinvestment in technology. Every hospital that buys an MRI scanner, for example, must pay for it whether or not it is used very often. The United States has over 3,000 MRI systems (at several million dollars each), whereas Canada is able to get by with fewer than 100. With a population approximately eleven times as large as Canada’s, the United States has approximately a hundred times as many MRI units. The complex system of funding medical care in the United States contributes significantly to the costs of medical care. Physician costs also have been rising, although not as rapidly as hospital costs. In addition to the general pressures of inflation in the economy as a whole, doctors’ fees have been affected by increases in the cost of equipment and supplies, the rising cost of medical malpractice insurance, and the need to practice “defensive medicine” to protect against malpractice suits by ordering every possible diagnostic procedure.