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Annual US healthcare waste totals $750 billion annually notes new report

Robin Wulffson MD's picture
healthcare, waste, fraud, presidential election, Medicare, Medicaid

September 6 by the nonpartisan Institute of Medicine (IOM), regardless of who wins the upcoming election, a major issue that needs to be addressed is that $750 billion in taxpayer dollars are squandered each year from unneeded care, complicated by paperwork, fraud, and other waste.

The report notes that the US healthcare system has become too complex and costly to continue business as usual. Inefficiencies, an overwhelming amount of data, and other economic and quality barriers hinder progress in improving health and threaten the nation's economic stability and global competitiveness. However, the knowledge and tools exist to put the healthcare system on the right course to achieve continuous improvement and better quality care at lower cost.

The authors of the report stressed that the costs of the system's current inefficiency underscore the urgent need for a system-wide transformation. They calculated that approximately 30% of healthcare spending in 2009 (approximately $750 billion) was wasted on unnecessary services, excessive administrative costs, fraud, and other problems. Furthermore, inefficiencies cause needless suffering. By one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state.

The committee that prepared the report noted that incremental upgrades and changes by individual hospitals or providers will not suffice. Achieving higher quality healthcare at lower cost will require an across-the-board commitment to transform the US healthcare system into a “learning” system that continuously improves by systematically capturing and broadly disseminating lessons from every care experience and new research discovery. It will necessitate embracing new technologies to collect and tap clinical data at the point of care, engaging patients and their families as partners, and establishing greater teamwork and transparency within health care organizations. Also, incentives and payment systems should emphasize the value and outcomes of care.

The ways that healthcare providers currently train, practice, and learn new information cannot keep pace with the deluge of research discoveries and technological advances, the report notes. How healthcare organizations approach care delivery and how providers are paid for their services also often lead to inefficiencies and lower effectiveness and may hinder improvement.

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Better use of data is a critical element of a continuously improving healthcare system. Approximately 75 million Americans have more than one chronic condition, requiring coordination among multiple specialists and therapies, which can increase the potential for miscommunication, misdiagnosis, potentially conflicting interventions, and dangerous drug interactions. Healthcare professionals and patients frequently lack relevant and useful information at the point of care where decisions are made. Furthermore, it can take years for new breakthroughs to gain widespread adoption; for example, it took 13 years for the use of beta blockers to become standard practice after they were shown to improve survival rates for heart attack victims.

The committee noted that mobile technologies and electronic health records offer significant potential to capture and share health data better. The National Coordinator for Health Information Technology, IT developers, and standard-setting organizations should ensure that these systems are robust and interoperable, the report says. Clinicians and care organizations should fully adopt these technologies, and patients should be encouraged to use tools, such as personal health information portals, to actively engage in their care.

For 31 of the past 40 years, healthcare costs have increased at a greater rate than the economy as a whole for 31. Most payment systems emphasize volume over quality and value by reimbursing providers for individual procedures and tests rather than paying a flat rate or reimbursing based on patients' outcomes, the report notes. It calls on health economists, researchers, professional societies, and insurance providers to work together on ways to measure quality performance and design new payment models and incentives that reward high-value care.

The authors note that, although engaging patients and their families in care decisions and management of their conditions leads to better outcomes and can reduce costs, such participation remains limited, the committee found. To facilitate these interactions, healthcare organizations should embrace new tools to gather and assess patients' perspectives and use the information to improve delivery of care. Healthcare product developers should create tools that assist people in managing their health and communicating with their providers.

The committee recommended that increased transparency about the costs and outcomes of healthcare also boosts opportunities to learn and improve and should be a hallmark of institutions' organizational cultures. Linking providers' performance to patient outcomes and measuring performance against internal and external benchmarks allows organizations to enhance their quality and become better stewards of limited resources. In addition, managers should ensure that their institutions foster teamwork, staff empowerment, and open communication.
The Institute of Medicine, an arm of the National Academy of Sciences, is an independent organization that advises the government.

Reference: Institute of medicine

See also:
Affordable Health Care Act may impact Medicaid and Medicare patients
Federal government proposes to slash graduate medical education funding
Healthcare costs predicted to soar in next decade
Doctors just saying no to Medicare and Medicaid patients