Eliminating Waste in the Healthcare System
Healthcare spending in the United States far exceeds that in other developed countries and the American health care system is widely recognized as wasteful. The Congressional Budget Office has concluded that up to 30 percent of the healthcare in the U.S. is unnecessary. Such estimates of waste are generally based on aggregate data such as total spending across areas. Connecting such macro based estimates to actual, identifiable waste is a complex task, but necessary if interventions are to be developed to eliminate waste. There is nascent literature documenting aggregate spending on services thought to be wasteful. For example, a 2011 study found that the price tag for 12 commonly overused tests, such as annual electrocardiograms (EKGs) for heart disease and imaging tests for lower-back pain, was about $6.8 billion. Recently medical societies, under the banner of the American Board of Internal Medicine’s Choosing Wisely campaign have begun efforts to identify potentially wasteful services. This initiative builds on more limited, earlier efforts to identify wasteful services, such as designation of some preventive services as harmful by the U.S. Preventive Services Task Force.
Identifying waste is complex because the value of any given service depends on the characteristics of the patient to whom it is delivered, such as age, gender and clinical attributes. For example, the U.S. Preventive Services Task Force recommends colorectal cancer screening for individuals over 50-74 years of age, uncertain in those 75-84 and harmful for those 85 years and over. Lists of wasteful services often contain many qualifiers describing the conditions in which delivery of the identified services are wasteful. In other instances, the same service may be clinically appropriate. For some services the conditions are easily observable, such as age. In other cases labeling any given claim as wasteful requires more subjective judgment that stretches the capabilities of administrative claims data. Thus, efforts to quantify waste will be subject to over counting (identifying services as wasteful when in fact they are clinically appropriate) and undercounting (failure to identify waste). Yet given the imperative to improve the efficiency of the health care system, such tools, despite the imprecision, can help guide cost containment efforts. Moreover, not only is removing this waste and unnecessary care from the system a way to reduce costs, it is also an opportunity to improve quality and patient safety.
To utilize this opportunity to improve health care quality and enhance patient safety, as well as stem increasing health care costs, VBID Health has collaborated with Milliman to create the Health Waste Calculator—an analytical tool that identifies and quantifies the use of unnecessary or harmful clinical services. The tool employs clinical evidence and the work of national initiatives such as the U.S. Preventive Services Task Force and Choosing Wisely to inform the definitions of wasteful, unnecessary, and even harmful care. The tool utilizes sophisticated algorithms to reduce coding misclassifications. To ensure it captures the latest clinical evidence and scientific findings, the Health Waste Calculator will be updated on a regular basis.
The Health Waste Calculator is an important step to arm healthcare payers and purchasers with the tools they need to more effectively and efficiently combine benefit design, payment policy, and educational interventions to improve the quality of care and decrease the cost.
*Dr. Fendrick, a founding Partner of VBID Health, is Director and co-founder of the University of Michigan Center for Value-Based Insurance Design. He is a Professor in the Department of Internal Medicine and the Department of Health Management and Policy at The University of Michigan. Dr. Fendrick remains clinically active in the practice of general medicine, seeing patients weekly.