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Case study

Measuring waste to improve care

How Virginia is reducing unnecessary healthcare services using MedInsight.

The challenge

The Choosing Wisely® campaign’s success has renewed interest towards reducing low-value healthcare services, classified as “unnecessary care” in the healthcare industry.

The Virginia Center for Health Innovation and Virginia Health Information were looking to translate the Choosing Wisely campaign into quantifiable results for their insured population. They partnered with Milliman’s healthcare analytics software solution MedInsight to examine the Commonwealth of Virginia All-Payer-Claims Database (APCD) for an analysis of 44 Health Waste Calculator health services measures, pulled from the Choosing Wisely recommendation list.


The approach

The campaign surveyed specialty physicians for their opinions about unnecessary tests and procedures, producing a powerful message about the sustainability of the healthcare industry. They have now published about 500 recommendations for overused tests and treatments. Although the Choosing Wisely survey results were part of a comprehensive educational campaign, there was very little data or measurement beyond the opinion survey.

The MedInsight Health Waste Calculator1 was used to examine 2014 APCD data2 for about 5.5 million Virginia residents. MedInsight used 44 measures from the Choosing Wisely recommendation list to quantify a low-value case. The 44 tests and procedures were coded with sufficient clinical nuance to enable MedInsight to see how much of the services rendered could be characterized as low-value or unnecessary.

These services were divided into several categories according to the cost of each service: very low-cost, low-cost, high-cost, and very high-cost. For the purposes of this case study, we combined very low-cost and low-cost services into one category called low-cost services; and very high-cost and high cost services were simply referred to as high-cost services.


The solution

The results of the analysis were impressive. The Health Waste Calculator found that over $586 million or $9.90 per-member-per-month was spent unnecessarily in 2014 alone, which is 2.1% of the Commonwealth’s total healthcare costs. Additionally, they found that low-cost unnecessary services were costing the Commonwealth overall twice as much as high-cost unnecessary services because of the frequency with which they were being provided.

  • The 44 services examined were provided 5.4 million times in 2014.
  • 1.7 million of those provided services were determined to be low value.
  • Approximately 20% of the 5.5 million Virginia residents received one or more low-value, unnecessary service in 2014.

Contrary to common belief, MedInsight found that unnecessary low-cost services were used over 12 times more than high-cost unnecessary services. This meant that lower cost unnecessary services contributed almost twice as much in needless spending to the APCD as the most expensive services. Costs from low-cost unnecessary services made up 65% of costs or $381 million, versus 35% of costs for high-cost unnecessary services.

What does this mean for Virginia and other states looking to reduce the costs of unnecessary care?

Eliminating costly and unnecessary healthcare procedures has been a goal for decades, but one that has been elusive at both federal and state levels. These results should have important implications for policymakers, healthcare systems, and clinicians who are struggling to find better ways to reduce unnecessary costs without disappointing patients, disrupting practice norms, or harming quality and access to care. Demonstrating these findings should direct the healthcare industry to a path of reducing unnecessary care.

Even a small decrease among clinicians in the use of the low-cost unnecessary services could lead to savings and serve as a strategy to catalyze the movement to tackle unnecessary care. A focus on low- cost, high-volume items is certainly less controversial than a policy targeting high-cost items and would not present financial issues for any specialty or advocacy group.

While just over 2% of total costs identified as unnecessary may seem relatively small, it is important to note that these cost estimates are conservative because they do not capture the downstream cascade of spending from low-value care. It also does not capture the loss of productivity for the patient, as well as the mental or physical effects of low-quality patient care that these unnecessary services can cause. These measures only represent 10% of the 400 low-value services already identified by Choosing Wisely. These 44 measures were chosen because they were the most amenable to claims analysis, and do not include costlier services such as low-value subspecialty visits or hospitalizations. As more potentially unnecessary services are identified and analyzed, the potential for savings could run into the tens of billions of dollars nationwide.

Decreasing wasteful healthcare costs reduces patient harm and improve efficiency of healthcare delivery. By shifting care away from potentially unnecessary circumstances to a more strategic approach including clinical scenarios that improve patient-centered outcomes, the healthcare industry can become more sustainable, while increasing the quality of care for patients.

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