The general rise in market costs of almost all commodities and utilities has also had its effect on hospital expenditures.
There are no signs of the rising inflationary trend being reversed. Apart from this all-round rise in costs, there are other reasons which account for growing hospital expenditures.
1. The Changing Character of Services:
Where physicians could do with only a few tests in diagnosing and treating a case, the trend has shifted to ordering more investigations and workups.
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Hospitals not only add service, but they also deliver the existing ones more frequently. The numbers of tests and investigations have more than doubled both for inpatients and outpatients.
Physicians, by virtue of their monopoly on decisions relating to type and intensity of care, ordering of investigative procedures and prescriptions and adoption of sophisticated technology have a significant role in cost aggregation.
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2. Lack of Commitment:
In government run hospitals, there is no commitment or motivation to lower the costs at any level.
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Few doctors have sufficient information as to whether services delivered by a hospital are worth their costs, or how much does it cost to provide a particular service. There are hardly any incentives for doctors and others to cut costs.
3. Technology Development:
Adoption of “latest” technologies has also contributed to rising hospital costs. In many instances, new technology is often embodied in new services that are additional to, rather than replacement for, existing services.
Consequently, new technology often increases the utilisation as well as intensity of hospital care, two important factors in the growth of expenditure by hospitals.
4. Changing Health Status:
If, on one hand, control of some of the communicable diseases has resulted in lower burden on hospital costs, on the other hand the “lifestyle” diseases like cardiovascular and metabolic disorders have brought in changes in the utilisation and intensity of medical care.
5. Increasing Proliferation of Specialists:
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The rate of referrals to specialists and super specialists has considerably risen. Referrals are now ordered at the slightest pretext.
6. Defensive Medicine:
With introduction of measures for consumer protection, the tendency for doing extra workups on patients has risen for fear of consumer action. While as the fear may only be imaginary.
7. Lack of Awareness of Economy and Productivity:
Concept of service has been the dominant principle around which hospitals have traditionally developed. Economy and productivity have not really been major concerns.
8. Reimbursing Practices:
Employers paying to hospitals for their workers’ medical care have no way to know whether tests and treatment are justifiably billed by hospitals.
So is the case with patients covered under health insurance. In fact hospitals get tempted to over-investigate or over treat patients for whom third party payments are received.
9. More costly facilities:
Proliferation of new investor-owned hospitals almost invariably has costly facilities.