One Person’s Trash

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…is another one’s treasure, as the saying goes.  This is an important principle to bear in mind as the US tries to get a handle on healthcare spending.  As health economist Uwe Reinhardt notes in a recent New York Times blog, value is often in the eye of the beholder.

The 2012 Institute of Medicine report, “Best Care At Lower Cost,” examined the estimated $765 BILLION in “waste” (of the total $2.5 Trillion in annual spending on health care), and broke it into six categories:

  1. Unnecessary services – $210 Billion
  2. Excess administrative costs – $190 Billion
  3. Inefficiently delivered care – $130 Billion
  4. Excessively high prices – $105 Billion
  5. Fraud – $75 Billion
  6. Missed prevention opportunities – $55 Billion

This table leads to some finger pointing.  Physicians can blame pharma, insurers can blame docs, and everyone can blame those who commit fraud.  It’s tempting to think we can make significant progress without having to do much ourselves.  Take administrative costs.  (Please.)  We’re all familiar with the statistics – a recent estimate, for instance, that the typical US physician spends nearly $83,000 in her or his time dealing with administrative issues, four times as much as their Canadian counterpart).  And we have our own frustrating experiences: when I started as a faculty member at AI DuPont Hospital in Wilmington, DE – with a catchment area that included parts of four states – I had to complete a 7 inch thick stack of insurance enrollment forms for the over 60 different payers we had contracts with.  Our own clinical practice services at MCW – the folks who do the billing and collections for our professional fees – employ around 500 people, or nearly 1 for every 3 providers!  Why focus on “unnecessary services” when we could shave nearly as much by eliminating the non-value added “administration.”

But every one of these categories, seen as waste from the system perspective, benefits someone.  Even fraud.  So any effort to decrease these will face some resistance, on top of any other barriers.  Decreasing administrative costs by, say, having a universal credentialing process and single claims platform, would costs tens if not hundreds of thousands of jobs.  And decreasing “unnecessary” utilization means less revenue to providers, meaning less resources to take care of the needy and advance knowledge.

It  does seem like a zero sum game.  But there’s one perspective we haven’t yet considered – the patient’s.  If we streamline the insurer bureaucracy, it might mean some of those people paid to deny claims may not be needed, but the hospital gets paid faster.  But more important, patients are more likely to get the care they need. If a $100 brand-name albuterol inhaler can be replaced with a $15 generic, it hurts the manufacturer, but it helps the patient who can perhaps afford to buy both that AND a controller med to keep from getting ill in the first place.  And yes, if I order fewer CT scans in children at sufficiently low risk after head injury that it’s almost certain to be negative, my bottom line suffers.  But the child is less likely to have a radiation-induced malignancy later in life.

One person’s trash is another person’s treasure.  But to the person who should be at the center of all of this – the patient – it’s all trash.

One Response to One Person’s Trash

  1. Smith, Kimberly says:

    Here’s another one to subscribe too. He’s one of the new VP’s.

    Kim Smith, BSN, RN/ CHW/CHHS Policy & Procedure Coordinator/266-6402/

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