We, in America, have a Healthcare Industrial Complex. It’s large. And its wasteful. PricewaterhouseCoopers recently released a study call “The Price of Excess” in October of 2009 that says that the US healthcare system wastes about $1.2 trillion of the $2.2 trillion spent nationally on healthcare. Wow. The three top areas of wasted spending are defensive medicine ($210 billion), inefficient claims processing (up to $210 billion annually) and care spent on preventable conditions related to obesity and overweight ($200 billion annually.)
If we cut out all of this waste in the system, it would provide an awful shock to the economy. Waste is built into the system. Waste is interconnected into the system and nothing of a major overhaul will put a material dent into the waste in the system.
I, frankly, am not optimistic of a system overhaul. There are too many entrenched interests on both sides of the isle. Providers, insurance companies, medical equipment manufacturers, the legal community and the pharmaceutical industry all have too much money at stake to come together and make a coordinated effort to cut back on waste.
An example of this waste is how hospitals get paid. Administrative treatment is expensive, taking up an estimated 15-30% of all health spending. The system is complex and this complexity adds administrative burdens and costs to every patient. And from the patient’s perspective, non-value added activities. I would estimate that an average large community hospital has about 300 different organizations who pay for services. Each payer has different rules about what’s eligible for payment and how much to pay and when to pay. This complexity necessitates the services of scheduling, registration, financial counseling, coding, claims, credentialing, utilization management and contracting. Reducing redundancies within the claims and patient payment system can save a hospital millions of dollars. However, that is just reducing costs in a single organization.
To have large scale and meaningful savings, payors and providers must get together and come up with different administrative systems to cut the non-value activities within the stream. And that I’m afraid will not happen unless there is an outcry from the general public loud enough to cut through the political sound bites of health reform.
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