Survey: Less Being Spent to Stop Health-Care Industry Costs

November 29, 2004 ( -Controlling costs and growing revenue are key strategic problems for the health-care industry, according to a Mellon Human Resources & Investor Solutions (HR&IS) survey.

The survey, Mellon’s “2004 Total Compensation in Integrated Healthcare Systems Survey”, shows that controlling costs remains the number one operational issue, with 60% of respondents citing it as a strategic challenge. The problem is getting worse too, with only 11% of respondents believing the situation has improved over the past three years.

Twenty-eight percent of respondents also cited decreasing revenue as a strategic challenge and the issue isn’t going away, it seems. By a margin of four to one, respondents believe that the problem has remained the same or gotten worse over the past three years. Another 27% thought that the price of drugs and services was also a challenge, with two out of every three people asserting that the problem has stayed as serious or has gotten worse over the last three years.

Improvements are being seen in some areas of the industry however, with nearly 40% stating that service to patients has improved in the past three years. Not a single respondent said that the quality had decreased in that time period. The same goes for technology issue, where not one respondent thought that technology-related issues had gotten worse since 2001.

A paradox seems to arise when solutions are considered, however. Despite the pessimistic view, the survey shows that major investments meant to improve operations have tapered off. For example, the percentage of businesses using business process reengineering to contain costs fell from 77% to 53% in only one year. The percentage of health care organizations improving their coding, billing and collection processes fell from 64% to 45% in the same timeframe. Similar declines were seen with computer systems and outsourcing, according to the survey.

Respondents’ overall performance and views of business conditions was pessimistic, according to the survey. Only 24% reported that they surpassed their business goals this year, down over 25% from last year. Twenty-two percent failed to meet their goals, up 4% from last year. Correspondingly, only 13% said that their financial results were better than usual, down from 36% last year.

Mellon’s HR&IS unit is a human resources and shareholder services business, and is part of Mellon Financial Corporation ( ).