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INTRODUCTION

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Illustration by George Folz, © 2019 Board of Regents of the University of Wisconsin System

BACKGROUND

Administration in healthcare is focused on creating an environment where health professionals can practice effectively and efficiently. Healthcare administrators’ goals are to improve the quality of care provided while managing the business aspects associated with making that possible. This field has evolved significantly as hospitals have grown and expanded into health systems.1 The first formal healthcare administrator education program was offered in 1934 and has expanded to more than 100 programs.2 Growth of positions in this field has been significant. While the number of physicians in the United States grew by 150% between 1975 and 2010, for example, the number of healthcare administrators during the same period increased by 3200%.3

There are many challenges within the US healthcare system. In 2016, the United States spent 17.8% of its gross domestic product on healthcare, while the average spending in similar high-income countries was much lower, at 11.5%.4 Despite this high degree of spending, life expectancy in the United States is 78.8 years, nearly 3 years less than the average life expectancy in other high-income countries.4 Recent efforts focused on combating billing fraud, implementing electronic health records, and adopting evidence-based practices have neither improved outcomes nor lowered costs, at least on a large scale across the entire country.5 Several reasons have been identified for this disproportionate spending compared to other high-income countries; these include (1) higher salaries for health professionals, (2) greater use and cost of pharmaceuticals, and (3) higher administrative costs. The latter are largely comprised of health-care administrator positions, which are considered essential due to the rapid pace of change in healthcare associated with regulations and accelerating technological advances.3 For more information and examples of the impact of technology on pharmacy practice, and healthcare more generally, readers are encouraged to explore the illustrated cases “Leverage,” “Integrated,” and “Innovator” in Chapter 13 Technology.

Effective healthcare administrators maintain a razor-sharp focus on value, ensuring every dollar spent results in improvements in health outcomes.6 This has been challenging as measuring costs accurately, and defining appropriate health outcomes, have proven elusive. Advances in treatments for cancer highlight this challenge well. The average price of new cancer medications increased 10% per year between 1995 and 2013.7 These increasing costs have outpaced associated improvements in health outcomes; for example, the median improvement in survival has been 2.1 months in patients with solid tumors over a similar time period.8 Measuring the amount of time added to cancer patients’ lives is a common health outcome measure, and comparing this to the cost of cancer treatments (including medications) provides useful information to make judgments regarding value. The average cost of cancer medications for each additional year of life those medications provide has increased from $54,000 in 1995 ...

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