High-Quality Healthcare Is Possible with Low Inpatient Spending

With technological advances in surgical procedures and the rising cost of healthcare worldwide, many countries are justifiably concerned about the rise in inpatient spending. For over a decade, the United States has made a concerted effort to reduce expensive inpatient stays in favor of cheaper outpatient care.

As a supplement to our World Index of Healthcare Innovation (WIHI), we ranked 32 high-income countries on inpatient spending per capita, ranking countries highest when their inpatient spending is lowest.

Portugal leads the Index with the lowest inpatient spending per capita ($661). However, some experts believe that low investment in inpatient care leads to poor outcomes. For example, countries such as Hungary, Slovakia, United Arab Emirates, and Saudi Arabia have lower inpatient spending per capita than most countries in the Index, but also have the worst outcomes for cardiovascular survival — defined in the Index as 30-day mortality rates following a hospital admission for heart attack or stroke.

On the other hand, the Netherlands has lower inpatient spending than more than half of the countries in the Index, yet has the lowest 30-day cardiovascular mortality rate of any country in the Index. In addition, Portugal has the lowest inpatient spending per capita in the Index, yet scores among the Index’s average on cardiovascular survival.

After accounting for outliers on spending such as Switzerland and outliers on mortality such as Saudi Arabia, the correlation between inpatient spending and hospital care quality is weaker, though an association remains.

After comparing countries on inpatient spending and 30-day cardiovascular mortality rates following hospital admission, we performed a secondary analysis by removing countries that were outliers on either inpatient spending or cardiovascular mortality, defined as countries that are 2 or more standard deviations above or below the average on either measure. As a result, Switzerland was identified as an outlier for spending while Saudi Arabia and the United Arab Emirates were identified as outliers for mortality. Though an association between inpatient spending and cardiovascular mortality remains, the association is weaker and suggests many countries can achieve the same or better outcomes while reducing inpatient spending.

Countries that are high spenders for inpatient care tend to have hospital-centric healthcare systems driven largely by low out-of-pocket costs for hospital care. Austria (#31, $1,838) and Switzerland (#32, $2,068) are prime examples of this spending behavior, although they achieve different outcomes. Hospital stays for Swiss patients are longer than average among high-income countries (8.1 days), driven in part by low coinsurance and copays for hospital care. The United States (#30, $1,766) is a notable exception to this rule, in that high prices per unit of inpatient care — not utilization — drive higher per capita inpatient spending.

While Switzerland and the United States achieve relatively high cardiovascular survival rates, other countries have similar marks while spending far less on inpatient care, including Norway (#25, $1,646), Australia (#24, $1,395), and Canada (#6, $825). The results suggest that countries can reduce inpatient spending while still achieving high quality care.

Countries in the Index employ different tactics to achieve lower inpatient spending. Top-ranked Portugal is notable, in that its socialized system keeps a lid on prices, delivers quality hospital care, and scores highest in the Index in emphasizing primary care to avoid hospitalizations. Other socialized or single payer systems, such as the United Kingdom (#23, $1,361), Greece (#13, $1,126), and Poland (#4, $741) attempt to restrict inpatient spending but deliver care that is below the median among WIHI countries.

On the other hand, free-market countries keep hospital spending in check primarily by preventing unnecessary hospitalizations and re-admissions. For example, the Netherlands ranks 1st for cardiovascular survival and 5th in preventing hospitalizations in the Index. It achieves these marks while ranking 14th for lowest inpatient spending, even though it spends more than 11 percent of GDP on healthcare (T-8th highest in WIHI). One reason the Dutch achieve such results is that the private insurance system drives greater value through innovative plan design. For example, providers compete to be included in insurance networks by offering integrated care arrangements that provide better follow-up care after a hospital stay.

No matter which strategy countries employ, one pattern clearly emerges: it is not only the amount of inpatient spending that matters, but also the percentage of inpatient spending in relation to overall healthcare spending; a four-percentage point decline in the percentage of total spending taken up by inpatient spending yields a one person per 1,000 decline in cardiovascular mortality. Even after accounting for outliers, the association still holds.

While the United States is exemplary in terms of lowering inpatient spending as a percentage of all spending, it can still learn from other countries in the Index to reduce the financial burden of inpatient care. Though commercial insurance in the United States has pushed successfully to reduce inpatient utilization, policies that encourage the development of innovative insurance models and increase competition among hospitals and insurers — as in the Netherlands and Switzerland — will further reduce inpatient prices in the United States.