Reducing Healthcare Waste: A Three Pronged Approach

By Dr. Anikia Nelson and Mark Leaman

6 February 2018

Practical Analytic Approaches to Healthcare Challenges

Experts and stakeholders across the industry agree that there is an immediate need to reduce wasteful healthcare spending in the US. A 2012 Institute of Medicine report estimated that one third of US healthcare spending, or $750 billion is wasted annually (Washington Post, September 2012). Of that amount, $210 billion is spent on unnecessary services attributable to overtreatment. Overtreatment can result from a number of varying factors. However, regardless of the underlying reasons, the end result is that patients are exposed to treatments and tests that do not result in optimal care and outcomes. In other words, these are healthcare services we shouldn’t be paying for regardless of the cost. More alarming than the huge amounts of money spent on overtreatment, is that many of these tests and treatments and their downstream effects can be harmful to patients.

There are many stakeholders motivated to reduce healthcare waste. Regardless of whether you’re a payer or a provider, the fundamental steps to actually reduce healthcare waste are similar:

  • Identify and quantify wasteful services;
  • Implement strategies to reduce utilization of unnecessary services; and
  • Track and evaluate the success of waste reduction strategies and adjust efforts accordingly.

To identify and quantify wasteful services, Milliman and VBID Health collaboratively developed a tool called the MedInsight Health Waste Calculator. The MedInsight Health Waste Calculator categorizes claims data using logic based on national initiatives such as Choosing Wisely, to quantify services that research has proven add no value in specific clinically nuanced scenarios. These wasteful services are flagged at the claim line level allowing the Health Waste Calculator to quantify utilization and costs associated with wasteful services. With over 400 clinical measures in the development pipeline, the latest version of the MedInsight Health Waste Calculator has 42 measures to quantify waste related to about 60 Choosing Wisely measures from claims data. Quantifying waste allows organizations to prioritize which services to target with waste reduction strategies by aligning internal priorities with metrics on waste prevalence and cost, and factors such as risk of member harm.

There are a number of high profile initiatives and collaborative partnerships aimed at identifying specific wasteful or unnecessary medical services. Two of the most prominent of these collaborative initiatives are Choosing Wisely and the US Preventative Services Task Force (USPSTF). One example of a service that is potentially unnecessary is cardiac imaging in certain situations. Specifically, the American College of Cardiology identified as unnecessary stress cardiac imaging or advanced non-invasive imaging in the initial evaluation of members where there are no cardiac symptoms or no high risk markers present. As noted on the Choosing Wisely website, “asymptomatic, low risk patients account for up to 45 percent of unnecessary screening.” (Choosing Wisely, American College of Cardiology) A more common and familiar category of services that has generated a lot of publicity over the years has been unnecessary prescription of antibiotics for non-bacterial infections. Among the harmful consequences of these services are increased antimicrobial resistance causing severe infections, complications, and longer hospital stays. (Antimicrobial resistance: risk associated with antibiotic overuse and initiatives to reduce the problem)

Once wasteful services have been identified within a population, the obvious question is, what can be done to reduce these unnecessary services. Organizations can leverage several different strategies to address and reduce wasteful services. Strategies are generally centered on one or more levers such as analytics and reporting, education and promotion, claim adjudication, provider network management, medical management, purchasing criteria, and/or benefit design. Strategies will vary based on cost and resources available to implement, and how much they disrupt the healthcare delivery and payment cycle. One of the MedInsight Health Waste Calculator’s earliest clients used the tool’s output to mature their waste reduction strategies and has realized significant savings by reducing wasteful services. By utilizing practice consultants in each of their accountable care organizations and embarking on member awareness campaigns among other interventions, this payer has reduced per member per month costs on ten waste measures ranging from 1.6% savings on unnecessary imaging for uncomplicated rhinosinusitis to 30.2% savings on unnecessary cervical cancer screening in women aged 13 to 20.

Less disruptive strategies, such as member awareness campaigns, will likely have the least amount of impact on reducing wasteful services. Initiating utilization management requirements for potential wasteful services can be costly and disruptive, but would have a high impact on reducing wasteful services. Quantifying unnecessary services in a population can provide guidance on where to focus an organization’s often limited resources. By categorizing identified waste into high volume, low cost services versus high cost, low volume services an organization can better predict expected savings against the cost of various intervention strategies. This article describes analysis of 44 wasteful health services in the Virginia All Payer Claims Database, which revealed that low-cost, high-volume services contributed the most to unnecessary health spending (Mafi, et al., 2017).

Regardless of the strategy, the ultimate objective of reducing wasteful services is to change the behavior of the providers who are ordering the potentially unnecessary services. With this key concept in mind, a group of researchers conducted a study to identify a framework that would be most favorable towards changing physicians’ behavior to reduce low-value care (Parchman, M.L., Healthcare (2016), The researchers conducted interviews with an eight-member stakeholder advisory committee that included patients, providers and health care leaders. Among their findings, the research group found that providers were most inclined to change their behavior when wasteful services were presented as not only wasteful, but also harmful or potentially harmful to their patients. The overall framework that the researchers found to be most effective in creating the culture for change included:

  • Prioritize addressing low-value care;
  • Build a culture of trust, innovation and improvement;
  • Establish a shared language and purpose; and
  • Commit resources to measurements

Once a strategy has been implemented, the final step is to track and evaluate the effectiveness of the intervention strategy. The same tools and methods used to identify the wasteful or unnecessary services should be used to track these same services over time to determine if there has been an actual reduction in the services that were targeted for intervention. In closing, there is no debate that measurement of waste is critical for any serious approach to reduce unnecessary healthcare services. Integral to a three-pronged approach to reduce wasteful and unnecessary services is identifying, quantifying and then tracking the wasteful services over time.

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