Healthcare News & Insights

$700 billion in waste: Where’s it coming from — and why?

The recent report that tagged health care waste at roughly $700 billion per year should come as a surprise to no one. But some of the causes of that waste might.

The report, by Thomson Reuters, identified several key factors that lead to various types of waste, fraud and inefficiency. And the biggest causes of waste — as documented by a variety of published research, as well as internal health care data — flies in the face of much conventional wisdom.

Among the leading drivers of waste — and some of their underlying causes:

  • Unnecessary care (40% of total waste, up to $325 billion per year) — Unneeded treatments, ranging from overuse of antibiotics to unnecessary diagnostics. These are sometimes prescribed to protect against malpractice, to move the patient to another facility and “churn” more appointments or simply to meet patients’ unrealistic expectations.
  • Fraud (19% of waste, up to $175 billlon yearly) — This includes everything from Medicare fraud to kickbacks for unnecessary referrals.
  • Administrative inefficiency (17% of waste, up to $150 billion) — This one boils down to time-consuming, often redundant, paperwork.
  • Medical errors (12% of waste, up to $100 billion) — Provider mistakes, and the follow-up treatment costs.
  • Preventable conditions (6% of waste, up to $50 billion) — Avoidable hospitalizations for chronic conditions like diabetes which are better, and more efficiently, managed with ongoing outpatient care.
  • Lack of coordination among care providers (6% of waste, up to $50 billion) — Lack of (or inefficient) communication among care providers leads to duplicate tests, over-prescribing, and other inappropriate treatments.

The good news? Most of these issues can be dealt with, at least in part, at the hospital and practice level. Even small steps to streamline paperwork and patient hand-offs, as well as improving communication among providers, can have a big payoff for everyone.

What are the best steps to take to eliminate some of this waste from health care — and what’s a realistic goal? Share your thoughts in the comments.

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