Health care costs of medical patients at an urban care center.

Many cost containment strategies advocate that physicians should use fewer or less costly resources. In order to place these strategies in perspective, components of charges (costs) for medical patients at an urban center were examined to ascertain their contribution to the total health care bill. Contributions to total costs by location of service were: inpatient, 77.9%; outpatient, 17.1%; emergency room, 5.0%. Contributions by cost category were: facility charge, 52.8%; tests, 25.6%; pharmaceuticals, 11.0%. A goal to reduce total costs by 5% would require reducing pharmaceuticals by 45.4% or tests by 19.5%. In contrast, the same goal could be accomplished by reducing hospitalization by only 6.4%. If a strategy increased ambulatory costs by 5%, but resulted in a 7.5% decrease in hospitalization, the total health care costs would still decrease by 5%. Thus, rather than using fewer and less costly resources, physicians are encouraged to use more resources in ambulatory care to prevent morbidity requiring hospitalization.