What do high healthcare costs and high tuitions have in common?

Let’s connect a couple of dots today …

A recent NY Times article explored “Why the Economic Payoff From Technology Is So Elusive”.

One example:

Look at this disconnect is in the doctor’s office.

Dr. Peter Sutherland, a family physician in Tennessee, made the shift to computerized patient records from paper in the last few years.

There are benefits to using electronic health records, Dr. Sutherland says, but grappling with the software and new reporting requirements has slowed him down.

Dr. Sutherland bemoans the countless data fields he must fill in to comply with government-mandated reporting rules…

He sees fewer patients, and his income has slipped.

The bottom line: over the years, due legal compliance and technology complexity, administrators (think: bureaucrats) have been added at a far faster rate than healthcare providers (think: doctors and nurses) …

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Hmmm.

Wonder why healthcare costs are so high …

What’s the link to college tuitions?

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According to the NY Times

A major factor driving increasing costs is the constant expansion of university administration.

According to the Department of Education data, administrative positions at colleges and universities grew by 60 percent between 1993 and 2009, which Bloomberg reported was 10 times the rate of growth of tenured faculty positions.

Even more strikingly, an analysis by a professor at California Polytechnic University, Pomona, found that, while the total number of full-time faculty members in the C.S.U. system grew from 11,614 to 12,019 between 1975 and 2008, the total number of administrators grew from 3,800 to 12,183 — a 221 percent increase.

Double hmm …

And what are the added administrators doing?

You guessed it: handling paperwork to comply with Federal regs.

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So, increased compliance requirements drives higher costs … and higher costs get attacked by increasing physician and faculty productivity (i.e. more work for the same or lower pay).

Does that sound like a winning formula to you?

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Thanks to JWC and SMH for for feeding a couple of the dots.
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#HomaFiles

Follow on Twitter @KenHoma            >> Latest Posts

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One Response to “What do high healthcare costs and high tuitions have in common?”

  1. neel master Says:

    Prof. Homa have you followed the conversation on Baumol’s cost disease? A cousin of the argument you make here.

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