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Healthcare's Main Contributors to Wasteful Spending


Three studies, same conclusion. Three separate studies largely agreed that unnecessary care or overtreatment represents the top contributor to wasteful healthcare in the U.S.

1 Main contributors to $600 to $800 billion in annual healthcare waste

40% Unnecessary care (“Unwarranted treatment, such as the over-use of antibiotics and the use of diagnostic lab tests to protect against malpractice exposure”)

19% Fraud

17% Administrative inefficiency

12% Healthcare provider errors

6% Preventable conditions

6% Lack of care coordination

Source: Thomson Reuters, 2010

2 Main contributors to $765 billion in annual healthcare waste

27% Unnecessary services

25% Excessive administrative costs

17% Inefficiently delivered services

14% Prices that are too high

10% Fraud

7% Missed prevention opportunities

Source: Institute of Medicine working group, 2011

3 Main contributors to $558 billion (low estimate) - $1263 billion (high estimate) in healthcare waste for 2011

28% (low) or 18% (high) Overtreatment (“Waste that comes from subjecting patients to care that, according to ound science and the patients’ own preferences, cannot possibly help them—care rooted in outmoded habits, supply-driven behaviors, and ignoring science”)

19% (low) or 31% (high) Administrative complexity

18% (low) or 12% (high) Failures of care delivery

15% (low) or 14% (high) Pricing failures

15% (low) or 22% (high) Fraud and abuse

4% (low) or 4% (high) Failures of care coordination

Source: RAND Corporation, 2012

A fourth study digs into some of the key drivers of overutilization:

1 Physician training and culture

2 Cultural preference for technological solutions

3 Direct-to-consumer marketing

4 Physician-directed pharmaceutical marketing

5 Fee-for-service payment structure

“The reality is that we are all human beings in the end. If I get paid more to do more, even if I don’t think I’m going to do more, I’m going to do more, because getting paid is very influential.”

—Brandon Combs, MD

6 Medical malpractice laws and defensive medicine

“People’s perspective of how likely they are to get sued drives behaviors, whether or not they actually are likely to get sued, and this has been shown many times.”

—Christopher Moriates, MD

7 Lack of cost transparency “It’s not about knowing the exact dollars and cents—that actually doesn’t matter. But it is about having some idea of magnitude, like an MRI is twice as expensive as a CT. When is it worth twice as much? When is it high value?”

—Christopher Moriates, MD

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