Excessive administrative costs in the health system

Study proves billions of potential savings in the healthcare system

02/01/2012

The bureaucracy in the health system is immense and causes horrendous costs. In fact, only a little more than a quarter of the income from contributions is spent directly on patient benefits. 23 percent of the contributions go to administrative costs on it, so the result of the current study „German healthcare system under scrutiny - cost trap complexity“ of the renowned management consultancy A.T. Kearney.

Thus, the administrative expense ratio in the health care system is significantly higher than the average value of the German industrial companies, which is only 6.1 percent, report the experts of A. T Kearney. More effective administration could save billions without risking sacrifices to patients. If all the options discovered by the consulting firm were used, the contribution rate could be reduced from 15.5 percent to 14.2 percent, according to the results of the current study.

Almost 30 billion administrative costs of the GKV
As part of their investigation „German healthcare system under scrutiny - cost trap complexity“ come the experts of A.T. Kearney to the result that in 2010, the administrative costs in the public German health system actually amounted to 40.4 billion euros. Where the administrative costs of statutory health insurance (SHI) according to A.T. Kearney were significantly higher than officially stated by the health insurance companies. About 68 percent (about 27.5 billion euros) of the administrative costs in the health system are thus caused by the GKV. According to the latest results, public health insurance accounts for 15.6% of the total expenditure of 176 billion euros. Thus, the administrative burden for the SHI is significantly higher (by a factor of 2.9) than the official figures. The statutory health insurance funds officially reported administrative costs of 5.4 percent of total expenditure or a total of 9.5 billion euros for the year 2010.

Intransparency and complexity as cost drivers in the healthcare system
Overall, the administrative cost ratio in the healthcare system is 3.8 times higher than that of industrial companies, A.T. Kearney. Thus, of each euro of contribution payments, a maximum of 77 cents would be spent directly on value-added activities on the patient, 23 percent would be required to cover the administrative costs. The experts at the management consulting firm attribute the high administrative burden primarily to the increasing lack of transparency and complexity in the healthcare system. As decisive factors for the growing complexity and non-transparency A.T. Kearney in this regard, the high number of different actors, the variety of products and services, the interface issues, the mismatched processes, the lack of organizational structures, the use of different IT systems and the indirect communication between stakeholders. In addition, the volatile policy has contributed with ever new reforms and laws as well as influencing the legislation by lobbying and interest groups to increase the cost-driving complexity. In addition, in the course of demographic change, patient requirements have increased as a result of age or living conditions, and, moreover, the range of services provided by service providers has continuously increased as a result of scientific progress, according to A.T. Kearney.

Savings potential of at least 13 billion euros in the health system
The study authors of the management consulting firm reveal a savings potential of at least 13 billion euros for the German healthcare system in their current study in terms of administrative costs. Accordingly, each euro contribution payments could be saved at least eight cents, which would correspond to a potential savings of 252.90 euros per contributor per year. This would allow a reduction in the current contribution rate from 15.5 percent to 14.2 percent, the experts explained. AT. In its independent and self-financed study, Kearney carried out a market research analysis in the period from June to August 2011 with around 6,000 service providers in the German health care system, identifying a considerable potential for increasing efficiency and reducing costs. (Fp)

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