Oct 10, 2012

If Banks and Airplanes Were Like Health Care (and Other Scary Thoughts)

If you think that the bills you receive from your doctor or hospital seem obscenely large and confusing, you are not alone.

The latest report from the Institute of Medicine, Best Care at Lower Cost: The Path to Continuously Learning Health Care in America, highlights the cost of waste in the American health care system. The report estimates that a staggering $750 billion
a year in the U.S. in 2009 was wasteful spending. 

Here is what a breakdown of how this money is misspent:
$210 billion - unnecessary procedures and treatments
$190 billion - paperwork and unnecessary administrative costs
$130 billion - inefficiently delivered services
$75 billion   - fraud
$55 billion   - missed prevention opportunities

Essentially, about 30 cents of every health care dollar is squandered.

Not surprising when you consider that a physician receives about $50 for spending quality time with a patient with a headache explaining conservative management options. Spending just a few quick minutes with this patient and ordering a brain MRI (which costs about $1500 and increases the patient's risk of cancer) makes this physician about the same amount of money, and depending on which circles he or she hangs out in, "helps one stay out of trouble".

So what are the implications of this report? A lot of attention in the health care reform debate has focused on rationing of services. This report offers some solutions about opportunities to cut costs without rationing.

The report discusses multiple provisions of the health law that could help bend the cost curve. Some of these include health information technology adoption, payment incentives rewarding outcomes instead of volume, team-based care coordination, patient portals to help patients and families share decision-making, and operations management to improve patient flow and increase efficiency.

The report tersely captures what would happen if other industries operated like health care currently does.
"If banking were like health care, automated teller machine (ATM) transactions would take not seconds but perhaps days or longer as a result of unavailable or misplaced records. If home building were like health care, carpenters, electricians, and plumbers each would work with different blueprints, with very little coordination. If shopping were like health care, product prices would not be posted, and the price charged would vary widely within the same store, depending on the source of payment. If automobile manufacturing were like health care, warranties for cars that require manufacturers to pay for defects would not exist. As a result, few factories would seek to monitor and improve production line performance and product quality. If airline travel were like health care, each pilot would be free to design his or her own preflight safety check, or not to perform one at all".
 - Ulfat Shaikh 

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