Eliminate Healthcare Waste, Eliminate Reform?

Could eliminating waste in healthcare eliminate the need for the Affordable Care Act?

Consider the latest numbers offered by the Congressional Budget Office (CBO) and The Institute of Medicine (IOM). The CBO now says it will cost $1.1 trillion to expand healthcare coverage to uninsured Americans over the next decade. The recent IOM study, Better Care at Lower Cost, pegs annual waste of all types at $765 billion. So removing two years of waste would more than cover insurance expansion for ten years.

Of course, the reform act calls for much more than expanded insurance coverage and cost reductions, but it’s interesting that the two areas with the biggest financial impact could potentially cancel each other out.

So, where are the biggest areas of waste in healthcare? The IOM had some surprising answers.

Although fraud is huge, it’s not the prime mover. Fraud from all sources accounted for “just” $75 billion, less than 10 percent of the total amount.
Prevention may well be the future of medicine, but missed opportunities for prevention at primary, secondary and tertiary levels of care totaled $55 billion.
The three biggest culprits, by far, were:

The choice by physicians to use more or costlier care than necessary accounts for $210 billion (and we have a financial system that is misaligned with the goal to reduce and eliminate this over treatment)
The paperwork required for care reimbursement costs $190 billion because of all the attendant inefficiencies that go along with the process
Operational inefficiencies and medical errors waste $130 billion each year
Electronic Medical Records (EMRs) are a way to trace and address care selection and overuse. The Affordable Care Act eliminates federal reimbursement for preventable medical errors. And Accountable Care Organizations, which offer financial incentives for physicians, hospitals and other health care providers to team up may fundamentally change our traditional “fee for service” payor system.

While many of these changes required will take years, if not decades, to fully take hold, TeleTracking can tackle operational efficiency challenges today and can point to real-life examples of what’s possible.

Improvements in organizational capabilities can get waste out of healthcare today by optimizing the resources they have at their disposal. Hundreds of leading healthcare systems can attest to millions of dollars of waste reduction by optimizing their operations, actually avoid building new facilities while increasing the amount of patient visits, by simply by making greater use of the facilities and resources that already exist.

Eliminate waste, eliminate reform – maybe not. But there is vast waste in the delivery of healthcare that can be immediately addressed by applying real-time capacity management technology along with some basic principles of management science to dramatically improve care delivery.