Bending the Cost Curve – the Macro and Micro

When something voraciously consumes $700 billion annually, you’d think it would be fairly easy to spot. And at first blush, it is. We already know that waste and inefficiencies – in terms of time, effort and resources – consume up to a third of our nation’s $2.7 trillion healthcare spend.¹

Creating a sustainable resource, by definition, means doing so without damage to or depletion of another resource. Yet we’re spending 18% of our Gross Domestic Product (GDP) on healthcare, with a projection by the Congressional Budget Office of 25% by 2025.²

That’s not sustainable.

So the real and complex challenge becomes: how can we wring out waste when it is seemingly intertwined with quality? In an attempt to fix what ails us, how can our healthcare system prevent throwing out the proverbial baby with the bathwater?

Bending the Curve

Since our 2002 founding, NEHI (formerly the New England Healthcare Institute) has made it our mission to bring together diverse perspectives from the national healthcare community, finding mutual solutions to mutual challenges. To focus much-needed attention on the issue of waste, we collected and distilled the results of nearly 1,500 peer-reviewed studies, conducted our own root-cause analysis, and identified, for the first time, exactly where the waste in healthcare is and how much it costs – both prerequisites to devising ways to remove it from the system.

Working in partnership with the WellPoint Foundation, we then launched “Bend the Curve,” an education campaign offering actionable ways healthcare leaders can reduce spending without sacrificing quality. By helping identify effective solutions, we’re hoping to help transform the healthcare landscape — waste and all.

Finding the Macro Waste

As the rising tide of chronic disease threatens to swamp our healthcare system, so too does our own cycle of reactivity and scatter-shot clinical practices. Accordingly, the top four drivers of waste are clinical in nature:

• Unexplained practice variation
• Medication underuse
• Adverse events
• Non-urgent ED use

The good news is that these drivers illuminate significant opportunities to reduce costs:

• Preventing readmissions = $25 billion in savings
• Reducing hospital admissions for ambulatory care-sensitive conditions = $31 billion in savings
• Decreasing medication errors = $21 billion in savings
• Addressing ED overuse = $38 billion in savings
• Reducing Antibiotic Overuse = $63 billion in savings
• Reducing Vaccine Underuse = $53 billion in savings
• Improving medication adherence = $290 billion in savings³

That’s $521 billion in waste and potential savings alone. And it doesn’t include the additional savings realized by the impact of one driver (medication adherence) on another (hospital readmissions).

Identifying the Micro Waste

While it’s important to examine the waste issue from the macro level, it’s also vital to view it from the ground, at the level of the patient.

When my husband Patrick was diagnosed with cancer, our experience exposed a number of smaller contributors to waste. Although his care was generally good and his caregivers compassionate, they were often unaware of inefficiencies.

For example, there was the surgical resident who opened the $180 suture removal kit, but had to toss it out because he’d forgotten to don surgical gloves. And there was the nurse who repeatedly delivered pills when Patrick was unable to take anything by mouth. Her hospitalist didn’t like to use electronic prescribing, so the medication order was difficult to track and change.

Then there was the time we visited the ED, and by the time I’d parked the car, Patrick was being taken for a repeat MRI and unnecessary insertion of a PICC line, ordered by the ED physician because nobody could find Patrick’s chart from the previous week’s MRI test at the same hospital. At the end of his inpatient stay, we received the old fashioned triplicate discharge planning form. The form would have left any lay person rather uneducated about their loved one’s homecare needs, yet responsible for coordinating the post-hospital care plan.

While these are individual examples of “micro waste,” they collectively offer a much bigger opportunity for macro improvement.

The Evidence for Innovative Solutions

How can hospital administrators mobilize to root out and quash waste? Start by understanding your performance. Gather data, data and more data. This is where health IT helps organizations innovate and transform clinical care into a well-oiled, cost-effective, high-quality delivery system.

Case in point: decision support solutions can help providers to practice better evidence-based medicine, which in turn improves quality and reduces readmissions. Analytics and automation help caregivers identify and hard-wire safe clinical practices. And in the future, improved performance also will mean increased reimbursements.

Electronic pharmacy solutions help to significantly reduce medication errors. Electronic health records (EHRs), CPOE and other electronic information exchange systems not only help improve patient safety, but support more efficient coordination of care among providers, help reduce redundant tests and procedures, and promote more cost-effective, safe transitions within the hospital or to another setting.

Moreover, innovative hospitals also will use technology to help create patient-centered medical homes (PCMH), enhance patient education, improve medication adherence and prevent chronic disease. By developing evidence-based programs, smart hospitals will make up-front investments that pay long-term dividends.

Another action item for hospital leaders: learn from each other. Look for successful examples of clinical quality improvement and waste reduction — like the organizations highlighted in this publication — and develop a strategy that works for you.

Doing More…With Less

The evidence is in and clearer than ever: each segment of the healthcare system must confront the physical and economic harm of wasteful care.

¹ Waste and Inefficiency in the US Health Care System, NEHI
² “The Long-Term Outlook for Health Care Spending,” Congressional Budget Office, November 2007
³ Health Care Leader’s Guide to High Value Health Care, NEHI, 2011