Finding the “why” behind health care waste

Costs of U.S. health care over time

  • Rising costs graph: $1.1 billion in 1996 to $6 trillion in 2027

    Ideally, the U.S. health care system would consistently deliver services with the highest probability of a positive outcome and lowest likelihood of patient harm. The result would be high patient satisfaction at the lowest possible cost.

    The reality is somewhat different.

    Between 2018 and 2027, national health spending is projected to grow at an average rate of 5.5% annually.1

    By 2027, health spending is projected to reach nearly $6.0 trillion.1

    Also, check out this study by JAMA Network that highlights the waste in health care.

Icon of a trash can
The Institute of Medicine estimates that $750 billion of health care spending is attributed to waste.²

What does waste in health care include?

Waste results from:

Unneeded services • Mistakes • Missed prevention opportunities • Delivery system ineffectiveness

  • Any health care procedure, inpatient stay, medication, therapy or test that does not meet the objectives of the Institute for Healthcare Improvement’s Triple Aim—improving patient satisfaction and the health of populations while also reducing the per capita cost of health care—meets the definition of waste.

    Waste in health care means lower margins and lost revenue opportunities for hospitals. But the financial impact of waste is not the only consequence: Waste and poor quality of care go hand-in-hand.

    When patients receive unnecessary medical treatment, it costs both the patient and the hospital time, money, unnecessary risks to the patient and legal liability risks to the hospital for patient harm.

    Medical errors are the third leading cause of death in the U.S. behind heart disease and cancer.3

Icons of money and a arrow pointing down near a clock

Excess expenditures. Wasted time and resources.
Lower quality care. Poor patient outcomes.

We see the “What?” behind health care waste inefficiencies.
But can we see the “Why?”

Understanding the factors that create waste in health care is the first
step in reducing costs and improving patient outcomes. 

Hypothetical example #1:
  • Icon of a hospital

    A hospital records $1.4 million in unexpected costs from excess ICU days.

  • Icon of a calendar
    Here's why

    The majority of excess ICU costs are traced to septicemia patients who are admitted Friday and Sunday; no hospitalist is on duty those days.

  • Icon of a physician

    For those days, hire a hospitalist who can focus on septicemia patients.

Hypothetical example #2:
  • Icon of a heart

    A hospital finds that 60-day, post-acute care expenditures for congestive heart failure are 41% over the expected rate, resulting in $28 million in excess expenditures.

  • Icon of a physician
    Here's why

    During the 60 days post-discharge, primary care physician (PCP) visits are 25 percent lower than expected, and outpatient laboratory testing is 38 percent lower than expected.

    This insight reveals that the hospital is underutilizing PCP visits and laboratory testing to monitor conditions.

  • Icon of a clipboard

    Correct the underutilization by improving care coordination and patient engagement programs.

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  • References
    1 Centers for Medicare & Medicaid Services. “NHE [National Health Expenditure Data] Fact Sheet, Projected NHE, 2018-2027.” Page last modified 04/26/2019. Accessed May 28, 2019. ----- 2 Institute of Medicine, 2012. “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America.” Accessed May 28, 2019. BestCareReportBrief.pdf. ----- 3 Makary, Martin A. and Michael Daniel. “Medical error—the third leading cause of death in the US.” BMJ 2016;353:i2139. Accessed May 28, 2019. ----- 4 Allen, Marshall. “A Prescription To Reduce Waste In Health Care Spending.” Health News from NPR, December 21, 2017. Accessed May 28, 2019.