JAMA: Target wasteful spending, not care

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While striving to provide the most innovative and valuable care to patients is the overarching goal of healthcare, the costs associated with this care are astronomical. Several strategies have been implemented into practice to curb these high expenditures, yet current healthcare costs are nearly 18 percent of the gross domestic product. Donald M. Berwick, MD, and Andrew D. Hackbarth, MPhil, say cut waste, not care.

Berwick, former president and CEO of the Institute for Healthcare Improvement and former administrator of the Centers for Medicare & Medicaid Services (CMS), and Hackbarth, of RAND in Santa Monica, Calif., put forth a special communication that was published online March 14 in the Journal of the American Medical Association to provide strategies and ideas on how to shrink healthcare-related costs into a sustainable range.

Berwick and Hackbarth said that healthcare expenditures are so high that they may be intruding into other government programs and are "undermining" the competition of U.S. industry.

“In just six categories of waste—overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse—the sum of the lowest available estimates exceeds 20 percent of total healthcare expenditures," Berwick and Hackbarth added. While the authors wrote the industry must find innovative and more effective ways to cut waste, they said this cannot be done by delving into value-added care.

“Commonly, programs to contain costs use cuts, such as reductions in payment levels, benefit structures and eligibility,” the authors said. They added that several opportunities are available to do this, in both the private and public sectors.

“Programs designed to make cuts of this kind appear across the policy spectrum, from many, carefully sequenced provisions of the Patient Protection and Affordable Care Act, favored by the Obama Administration, to draconian proposed shifts of Medicare costs to beneficiaries and reductions in payments to physicians and hospitals, favored by several Republican congressional proponents,” the authors wrote.

“Here is a better idea: cut waste,” they added. “The opportunity for waste reduction in healthcare is enormous.”

Berwick and Hackbarth outlined six categories where waste could be cut:

  • Failures of Care Delivery: This begins with poor execution of certain care programs, the authors said. If this were remedied it could potentially save between $102 billion and $154 billion in wasteful spending.
  • Failures of Care Coordination: This occurs when patients fall through the cracks of fragmented care. How to fix? By decreasing hospital readmissions. Failure of care coordination is costly and accounted for $25 billion to $45 billion in waste in 2011 alone.
  • Overtreatment: This wasteful spending usually comes from patient preference such as excessive use of antibiotics or surgery, when waiting might be better. These types of situations accounted for $158 billion to $226 billion in wasteful spending in 2011.
  • Administrative Complexity: This could stem from “inefficient or misguided” rules implemented by regulatory agencies or payors. An example could be the complex billing process physicians must carry out. The authors estimated that this category alone represented between $107 billion and $389 billion in wasteful spending in 2011.
  • Pricing Failures: This occurs when pricing fluctuates and moves from those that are expected in well-functioning markets. For example, MRI and CT scan costs are significantly higher in the U.S. compared with other countries. The authors said this category represented between $84 billion and $178 billion in wasteful spending in 2011.
  • Fraud and Abuse: The authors estimated that this resulted in $82 billion to $272 billion in wasteful spending in 2011.

The challenge to reduce healthcare spending is analogous to the challenge of reducing CO2 emissions, according to Berwick and Hackbarth. “The 'business as usual' curve of U.S. healthcare expenditures is economically disastrous.”

The authors said that fixing the problems highlighted in the six categories could significantly reduce costs.

“Addressing the wedge designated 'overtreatment,' for example, would require identifying specific clinical procedures, tests, medications and other services that do not benefit patients and using a range of levers in policy, payment, training and management to reduce