Health Data Analytics for Identifying Wasteful Services

By Nancy Zoelzer

15 September 2014

Eliminating inefficient and unnecessary medical services improves overall healthcare efficiency while reducing costs. In 2009, the Institute of Medicine (IOM) identified $750 billion of wasted spending, with unnecessary services accounting for $210 billion. The Congressional Budget Office has estimated that 30% of medical care in the U.S. is unnecessary care. (Source: Institute of Medicine article “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America”, 2013.) Removing this waste and unnecessary care from the system will reduce costs, and is an opportunity to improve quality and patient safety.

Waste Calc 09.15.14

There are a number of use cases for analyzing health claims data to find wasteful and likely to be wasteful services.

  • Quantify necessary vs wasteful services
  • Identify opportunities for cost savings
  • Provider profiling and pay for performance risk sharing reporting
  • Employer Group Reporting to convey the value of health plan services provided to employers

In a wasteful services pilot study, Milliman looked at one health plan’s claims data for Medicare and Commercial over a one year period (November 2012 – October 2013). Observations from that study found that 21% of members had at least one wasteful service, 25% of all services provides were wasteful and 2.12% of the total claim cost allowed dollars were wasteful. Further data analysis found that 80% of the wasteful dollars came from only four measures:

  • Stress cardiac imaging or advanced non-invasive imaging (58% – $8,568,369)
  • Annual EKGs or cardiac screening (12% – $1,779,260)
  • Lower back pain image (6% – $940,363)
  • ED CT Scans for Dizziness (4% – $533,876)

To assist in identification of wasteful services, Milliman, along with VBID Health, has developed the MedInsight Waste Calculator, which is an analytical tool that provides actionable data to support healthcare quality, efficiency, and effectiveness reporting. The calculator brings together clinical expertise and powerful data analytics—allowing healthcare managers to target and reduce wasteful spending.


To learn more about identifying and eliminating waste in the healthcare system, join us at our next MedInsight webinar:

Spending Growth, Cost Containment, and Elimination of Waste in the Healthcare System

September 17, 2014, 2:00-3:00 PM ET


Although spending growth has slowed recently, pressure to continue to hold the line on spending has increased. Competition in the exchanges, increasing fiscal pressure from employers, and government reduction in payment to health plans all suggest insurers must devise new ways to control spending. For providers, new payment systems such as global and bundled payment models impose economic and clinical accountability in which financial success requires elimination of waste—because greater volume is accompanied by greater cost but not greater revenue. This new environment requires new measurement systems. The MedInsight webinar will focus on policy issues related to spending trends and will present ways to help payers and providers quantify waste in their system.



Michael Chernew, PhD, VBID Health, Harvard Medical School

Dr. Chernew is a founding partner of VBID Health, a professor at Harvard Medical School, serves as the Co-Editor of the American Journal for Managed Care, and as Editor of The Journal of Health Economics. He is a member of the Congressional Budget Office’s Panel of Health Advisors as well as a Research Associate of the National Bureau of Economic Research.

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