What’s Under the Hood? Quick Look at Hospital Expenses

By  |  November 1, 2016 | 

It’s helpful to know where hospitals spend their money.  You might see a lot of technology and devices floating around the wards, but to keep the beds full, it’s all about FTEs and human capital. Have a look at the figure below:

Imagine the C-suite sitting down to make decisions regarding the upcoming annual budget.  While we might focus on the overuse of triple-lumen catheters or a high-risk case and legal costs, the executive decision makers think about personnel.  A hospital will burn approximately two-thirds of its spend on labor.  Medical and Pharma supplies, technology upgrades, keeping the lights on, repairs and maintenance all chip away at the coffers–but it’s the employed manpower the first floor needs to think about and follow.  The battles hospital administration become embroiled in with organized labor always make headlines, but it’s there leadership may find the greatest savings.

The healthcare workforce has grown by leaps and bounds over the last twenty years (mostly non-clinical workers–including management), and the staffing ratios per patient have likewise increased.  Some of the rise has led to improvements in care, but the growth in productivity we would expect commensurate with our workforce expansion has not paid significant dividends. Adding to the burden, the shift in hospital mission from the in to outpatient setting will further complicate hiring and firing choices.









Need I invoke the Willie Sutton parable?  I think not.

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About the Author: Brad Flansbaum

Brad Flansbaum
Bradley Flansbaum, DO, MPH, MHM works for Geisinger Health System in Danville, PA in both the divisions of hospital medicine and population health. He began working as a hospitalist in 1996, at the inception of the hospital medicine movement. He is a founding member of the Society of Hospital Medicine and served as a board member and officer. He speaks nationally in promoting hospital medicine and has presented at many statewide meetings and conferences. He is also actively involved in house staff education. Currently, he serves on the SHM Public Policy Committee and has an interest in payment policy, healthcare market competition, health disparities, cost-effectiveness analysis, and pain and palliative care. He is SHM’s delegate for the AMA House of Delegates. Dr. Flansbaum received his undergraduate degree from Union College in Schenectady, NY and attended medical school at the New York College of Osteopathic Medicine. He completed his residency and chief residency in Internal Medicine at Long Island Jewish Medical Center in New York. He received his M.P.H. in Health Policy and Management at Columbia University. He is a political junky, and loves to cook, stay fit, read non-fiction, listen to many genres of music, and is a resident of Danville, PA.


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