Healthcare Waste in the United States Healthcare System

How America will pay for healthcare is a subject on the mind of virtually every American today. As Congress determines who will pick up the tab for this important and growing expense, it is worthwhile to take a close look at the cost of healthcare itself. Are there areas where expenses can be cut without undermining the quality of care provided? How prevalent are misuse, overuse, and fraud? This paper tackles the tangled issue of healthcare waste and arrives at some interesting, and perhaps even surprising, conclusions: America’s healthcare system is, indeed, hemorrhaging billions of dollars, and the opportunities to slow the fiscal bleeding are substantial.

To organize the evidence supporting claims for the magnitude of waste in the healthcare system,we first suggest a set of categories of waste. For each category, there is a simple definition, a brief description of the examples, and references that allow us to make a reasonable assessment of total annual waste for each category. Category results are then aggregated to estimate a reasonable range for total annual healthcare system waste.

For each of our categories of waste — Administrative System Inefficiencies, Provider Inefficiency and Errors, Lack of Care Coordination, Unwarranted Use, Preventable Conditions and Avoidable Care, and Fraud and Abuse — we reviewed findings from our own analyses of our proprietary healthcare databases, and synthesized the results of recent published studies and expert opinion. The result is an estimated range for the total value of possible waste in that category. An understanding of the general magnitude of the various types of waste should help toprioritize and focus efforts to improve system efficiency.

Inefficiencies in the care delivery processes of individual providers result in significant waste. Many provider process inefficiencies are similar to those experienced in other types of organizations, such as resource scheduling; appropriate mix of general lower-cost and specialized higher-cost resources; facility or equipment utilization or throughput; and timing and coordination of multiple procedures for a single patient to minimize downtime. Documented examples of these types of inefficiencies include:

• Inefficient use of professional staff extenders such as nurse practitioners and physician assistants

• Inefficient use of facilities and equipment, such as low utilization of expensive imaging equipment and inefficient scheduling of operating rooms and teams 

• Unnecessary one-day hospital admissions (e.g., for observation or routine testing) and extended stays
• Over-utilization of testing (e.g., lab, imaging) for hospitalized patients
• Over-utilization of intensive care units

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Thomson Reuters' Healthcare Analytics | White Paper | Where can $700 billion in waste be cut annually from the US healthcare system?