How do we Reduce Healthcare Spending Waste to Improve the Value of Care?

By | November 22, 2019
Learning from mistakes

In today’s healthcare climate, creating more affordable healthcare services and reducing wasteful spending is the utmost priority. Wastefulness accounts for dollars that are not going towards care, meaning they are affecting the unit price of a service without offering a benefit. According to present conversations surrounding healthcare, the nation’s level of waste is 30% of the overall health care spent or $0.30 of every single dollar.

The Institute of Medicine identifies six factors contributing to this waste: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity.

Taking this “Waste” one step further, a recent examination of the cost in the US health care system and projected savings from interventions that reduce such waste, by Shrank et al. in JAMA revealed there to be between $760 and $935 billion in potential misuse of funds. And yet, the anticipated savings (excluding savings from administrative complexity) ranges from $191 to $282 billion, or 25% of the identified money being miss-spent.  These numbers do not include the cost of delivering such savings; thus, these are gross, not net amounts. Interestingly, the reason they did not comment on potential savings from administrative complexity is they found no studies that addressed this important factor.

The study went on to identify that waste accounted for $265.6 billion or 28-35% of the overall category of costs. Included in this number was billing and coding waste as well as time physicians spend on reporting quality measures. Interestingly, these are two areas where with some small interventions there can be some impactful change.  If we take a deeper look at decreasing waste here, there are many benefits regarding provider satisfaction and improved productivity.

As mentioned earlier, if the administrative complexity category represents the most significant contribution to miss-use of spending, it is surprising this area has not been looked at more closely for opportunities to reduce waste. Furthermore, this seems to be an area that creates the greatest “bang for the buck” and most satisfaction for providers. For example, standardization of quality metrics across all payers will reduce the reporting burden because currently, a great deal of cost and time is required to review, understand and deliver reports. There is also concern that not all quality metrics legitimately enhance value to the patient, which affects other domains.

Integrated Delivery Networks (IDN) offer an opportunity to reduce waste and impact the value of the care we provide. With an IDN there is a much higher potential for coordination between different components of the health care ecosystem, especially when a payer is a member of the IDN. Efficiencies abound when one examines the fact that an IDN spends money on billing and collecting between two different divisions of the same company. This situation occurs within both the payer and provider components.

As we continue delivering an affordable product to those we serve, let us understand and impact the areas that have the most significant effect and create greater provider satisfaction. Coordination of our quality metrics and decreasing administrative burdens are two such ways.