Target 6 areas of waste to curb healthcare costs

Hospital leaders looking to cut back on waste should focus on six categories that account for more than 20 percent of escalating healthcare expenditures, according to an article today in the Journal of the American Medical Association (JAMA) by former CMS administrator Donald Berwick and Andrew Hackbarth, an assistant policy analyst for the RAND Corporation.

"The actual total may be far greater. The savings potentially achievable from systematic, comprehensive, and cooperative pursuit of even a fractional reduction in waste are far higher than from more direct and blunter cuts in care and coverage," the authors wrote.

In particular, hospitals should address overtreatment, inferior care coordination, poor execution of care processes, administrative complexity, pricing failures and fraud and abuse.

According to the article, instances of overtreatment contributed $158 billion to $226 billion in wasteful spending in 2011. To address overtreatment, providers need to identify particular clinical procedures, tests and medications that do not help patients, as well as apply policy, payment and management tactics to reduce their use in applicable situations, the authors wrote," Cardiovascular Business noted.

Berwick voiced similar sentiments last year, recommending hospitals avoid cutting services and instead focus on improving the quality of care in order to save money. He attributed poor coordination, inefficient and unnecessary care and lack of respect for patients' needs as major cost drivers, FierceHealthcare previously reported.

Meanwhile, the Institute of Medicine (IOM) is calling for new public health spending goals of $24 billion annually, the agency announced yesterday. Doubling the current $11.6 billion federal appropriation for public health would enable state and local public health departments to address population health needs adequately, according to the IOM report.

For more information:
- here's the JAMA press release and abstract
- read the Cardiovascular Business article
- check out the IOM press release and briefing slides (.pdf)