Breaking the cycle of waste in healthcare
IMAGINE what would happen if we learned that a major business was wasting a third of its revenue by grossly overspending while rewarding poor quality and mistakes. Everyone from the company's board members to its shareholders would be outraged. They would demand answers. And they would demand change.
There is, in fact, such a business: healthcare. It is an industry in which everyone has a stake - as a patient, a payer, or a provider. And yet the stakeholders have been alarmingly quiet on the issue of waste and inefficiency.
This is surprising because a staggering $760 billion -- more than the $700 billion bailout of the US banking system and a full third of the $2.3 trillion in annual healthcare spending - is wasted on things like medical mistakes, hospital-acquired infections, medication errors, overuse of emergency departments, and unnecessary lab tests and medical imaging.
The waste issue highlights a vital truth in the healthcare debate: The answer to the nation's healthcare crisis is not simply universal health insurance. Access to healthcare is critical, but so is reforming the delivery of care. And that's where eliminating wasteful spending comes in.
Until now it's been unclear where the system's stakeholders should direct their outrage. We know anecdotally that wasteful spending is out there, but pinpointing exactly where the waste is, why it exists, and how much it costs has been a challenge.
The search thus far has focused on operational issues (inefficient claims processing or ineffective use of technologies, for example) as the primary culprit. But a recent set of reports from the New England Healthcare Institute has done much to quantify specific, actionable examples of healthcare waste in systemwide clinical care.
NEHI's research, which describes waste as "the triumvirate of overuse, underuse and misuse of care," identifies five sources of wasteful practices that, if eliminated, would offer dramatic cost savings:
With this evidence comes a clear guide to "shareholder activism" to break the $760 billion cycle of waste. Doing so will require surmounting cultural, political, and financial barriers that now protect the status quo.
In addition to promoting policies that steer physicians toward evidence-based care, we must improve medical practices through innovation (such as limiting antibiotic use by testing at the point of care). We must determine the causes of emergency department overuse and strengthen the primary care system. And we must advance the adoption of information technology to decrease medical errors.
We also need to change the way we pay for care. Today's providers are paid for quantity and not quality. Sub-specialists are paid vastly more than primary care physicians. The more a patient is seen, the more tests endured. The more CAT scans, EKGs, and MRIs that are taken, the more the system earns.
And there must be a societal shift toward prevention and wellness - an emphasis on health rather than healthcare. Supporting healthy behaviors will not only improve the health of the community, but offers another viable means of reducing healthcare costs.
It's a tall order, but now that we've uncovered the leading sources of wasteful spending, there are no more excuses for inaction. All of us - consumers, government, industry, and the healthcare community - should demand the same performance that we expect of any enterprise. We must start thinking in new ways about participating in our own health, and we must confront the physical and financial harm of NEHI's "triumvirate of waste" in healthcare.
James Roosevelt Jr. is president and CEO of Tufts Health Plan. 