Is Healthcare Management a Large Portion of Costs?







Healthcare costs are again at the forefront of public discussion. The finger-pointing at who is pocketing the enormous growth in spending is heating up. To some, the everlasting icon of both waste and greed is the health administrator.  Recently an Organization for Economic Co-operation and Development report goes so far to say administrative costs “makes no or minimal contribution to good health outcomes” and makes up over 8% of healthcare spending.   I say “show me good outcomes without administrative support”, but nobody asked.  Plus I don’t know what administrative costs should be in a service industry, but 8% doesn’t seem too bad.  Of course the cost-blame is not limited to administrators:  Former Wall Street Journal healthcare editor Robert Pollack thinks that Chiropractors and Podiatrist services are jacking up our insurance premiums.

Are healthcare administrators and managers costing us a lot compared to doctors (and podiatrists, chiropractors, etc.)?  Some things are easy enough to check, so I looked into this one.  The US Bureau of Labor Statistics  (BLS) does a pretty good job at measuring how many people we have working in various job categories across the US, and they even capture salaries.   All I had to do is to download the latest BLS data into my infograph maker, and there you go:


Managers and administrators make up 3% of this workforce population, but cost 5% of the salary. That’s because they make a little more money than the average in this group. Physicians and Surgeons make up 5% of the workforce but cost 15% of the payroll dollars in this group.   On the other hand, nurses (RNs, LPNs, CNAs etc.) make up 42% of the workforce, but only cost us 38% of the salary spending.  Thank you amazing nurses!

This chart is good for pointing out that Healthcare Managers and Administrators are not breaking the bank and Nurses are the backbone of the workforce, but it has some limitations.  The data only includes clinicians and administrators, -and only those in the healthcare delivery industry.  Not pharma, not insurance industries. Not even those expensive-looking EHR consultants in Information Technology Services that you suspect are busting the budget. But it does include Chiropractors and Podiatrists, and they are such a small piece of the pie that they got rolled up into “Physicians and Surgeons”.





Dr. Jonathan P. DeShazo is an expert on health information technology, clinical data, and consumer informatics. He is currently an Assistant Professor in the Department of Health Adminstration and serves as Scientific Director of the Biomedical Informatics Core at Virginia Commonwealth University.

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