![]() Direct expenses accounted for 54.6% of total expenses ($20.40 of $37.37) in the inpatient setting and 59.1% of total expenses ($20.90 of $35.39) in the ambulatory setting. Wages and benefits accounted for approximately two-thirds of direct expenses (inpatient, $14.00 of $20.40 ambulatory, $14.35 of $20.90), with nonbillable supplies accounting for less than 10% of total expenses (inpatient, $2.55 of $37.37 ambulatory, $3.33 of $35.39). From FY2005 to FY2014, expenses in the OR have increased faster than the consumer price index and medical consumer price index. ![]() Teaching hospitals had slower growth in costs than nonteaching hospitals. Over time, the proportion of expenses dedicated to indirect costs has increased, while the proportion attributable to salary and supplies has decreased.Ĭonclusions and Relevance The mean cost of OR time is $36 to $37 per minute, using financial data from California’s short-term general and specialty hospitals in FY2014. These statewide data provide a generalizable benchmark for the value of OR time. ![]() Furthermore, understanding the composition of costs will allow those interested in value improvement to identify high-yield targets. Understanding hospital costs is critical to value-based care. Hospitals charge insurers and patients at a markup, 1 expecting a reimbursement (revenue) that is greater than their actual costs to generate a profit. Whereas in traditional fee-for-service models, more services equate to more revenue, new models, such as bundled payments, will reimburse hospitals a set amount for the surgical episode. 2 These capitated models focus on cost control, shifting the burden of cost minimization away from insurers and onto clinicians and administrators.
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