In 2018 alone, the total American spending on healthcare was valued at $3.65 trillion. Only four countries in the world have a GDP higher than this spending alone. On paper, this makes for a very high level of healthcare standards, which should ensure flawless patient outcomes and ultimate provider satisfaction. However, a 2019 JAMA report has unveiled that anywhere between $760 billion and $935 billion gets wasted, making around 25% of the total healthcare spending.
The report highlighted six major wastage domains:
- Administrative Complexity (Estimated Wastage: $265.6 billion)
The biggest source of wastage, as highlighted in the JAMA report, is due to intricacies involved in managing the administrative work of practice. This includes interaction with health plans, coding and billing errors, inventory management, and ineffective documentation. According to research, the annual per-physician cost of interacting with insurance plans is $83,000. Combined with other administration-related costs, this particular domain results in a quarter of the total healthcare wastage.
- Pricing Failure (Estimated Wastage: $230.7 billion to $240.5 billion)
Over the entire geography of the US, there is substantial variance in the prices of medical drugs, lab tests, and clinical procedures. Also, the prices of certain medical commodities are higher in the US as compared to the rest of the world. For example, an average CT exam costs $896 in the US in comparison to $500 in Australia, $279 in the Netherlands, and only $97 in Canada. Similarly, the average cost of an MRI in the US is $1,145 as compared to $350 in Australia, and $461 in the Netherlands. The lack of pricing transparency is one of the biggest reasons why inefficiencies in pricing exist in the US healthcare setup.
- Failure of Care Delivery (Estimated Wastage: $102.4 billion to $165.7 billion)
The US is one of the heftiest spenders in healthcare and the least they expect is to enjoy a decent healthcare experience. Unfortunately, the reality is not so vivid. First of all, providers are charging differently across the country for the same treatment. Preventive care delivery is also not effectively practiced. Inconsistency in the quality of care given is also a major failure of the current healthcare landscape.
- Overtreatment or Low-Value Care (Estimated Wastage: $75.7 billion to $101.2 billion)
Prescribing the right plan of medication needs due diligence. In some cases, two patients with seemly similar disorders might need different prescriptions owing to their prior clinical history. Sometimes, an ailment that can be cured by simple medication may wrongly be prescribed surgery. On the other hand, there has been a noticeable increase in the overuse of end-of-life care medications.
- Fraud and Abuse (Estimated Wastage: $58.5 billion to $83.9 billion)
Despite the enforcement of all quality regulations, fraudsters can find loopholes and use them to their advantage. Activities such as overcharging for drugs and services, submitting bogus claims, and misguiding payers increase the overall healthcare spending.
- Failure of Care Coordination (Estimated Wastage: $27.2 billion to $78.2 billion)
The last domain of waste is the failure of the healthcare system to build clear coordination between a provider and his patient. For instance, there are certain ailments that do not need the physical visit of the patient and can be treated remotely. Sometimes, due to human error, avoidable patient complications can also take place. It is reported that over 310 million patients around the world get operated each year, around 50 million patients develop complications following surgery and 1.5 million patients eventually die from such complications. Although these statistics are on a global level, we cannot negate the fact that US healthcare is experiencing a failure to effectively bring the providers and patients on the same level of coordination.
A few additional factors, which are also responsible for exorbitant healthcare costs include:
- Breaching of PHI
For many years, the US healthcare industry has been the favorite target for hackers and cybercriminals. No one can forget the Accudoc Solutions incident, where hackers breached the data of 2.65 million patients. A survey conducted by Accenture states that over 26% of the US residents have been at the receiving end of a cyberattack. HIPPA states that the average cost of a healthcare breach in the national healthcare ecosystem is $15 million. Despite all the safety protocols that have been laid down to prevent hackers from maliciously accessing PHI, the probability of enduring another breach can never be nullified.
- Faulty EHR/PM Systems
The enactment of the Patient Protection and Affordable Care Act (PPACA) has mandated the use of EHR systems in all healthcare practices and hospitals. Unfortunately, not all EHR systems are alike, and some of them may not be suitable for a certain type of practice. Opting for a misfit/faulty EHR Systems and PM system makes it extremely challenging for healthcare practices to operate optimally.
- Lack of Preventive Measures
“Prevention is better than cure” is a renowned English proverb – and is very much applicable in the healthcare sector. A lot of diseases can be detected and treated in their nascent stages. Instead, due to the fragmented healthcare system, such diseases usually catch the attention of the provider and patient when the symptoms have escalated significantly. Healing such a patient usually takes more time and resources.
- Missed Charges and Bills
The last thing a healthcare practitioner wants is to administer a drug to his patient and not record it. For example, for one missed Neulasta injection, a provider would need to bill another 15 such injections to make up for the cost of the missed one. Such unaccounted costs also disturb the revenue management of healthcare practices.
- Faulty ROI Calculation
Some healthcare facilities are influenced by different third-party vendors and are lured into spending millions on products that do not have any substantial ROI. In other cases, a hospital spends millions in expanding its setup to a remote county, there the influx of patients is pretty low, making it hard even to reach the breakeven point. Such unplanned investments are known as bad investments and are one of the reasons where healthcare spending goes unchecked.
“Removing waste from U.S. health care will require both awakenings a sleepy status quo and shifting power to wrest it from the grip of greed,” Donald M. Berwick, the former administrator of the CMS once said.
In the past, cost-cutting measures haven’t yielded much success. Now, it has become more imperative than ever for healthcare policymakers to adopt a holistic approach and carry out waste reduction interventions in traditional healthcare. According to JAMA, if certain interventions are carried out, it can save anywhere between $191 billion to $282 billion – a 25% reduction in the wastages incurred.