Health care is an industry. Amid the political rhetoric, it is easy to forget that, as an industry, health care accounted for national expenditures of $2.5 trillion last year, representing 17.3 percent of U.S. gross domestic product. While the health care reform agenda has spotlighted many of this industrys shortcomings, there remains great opportunity to address the root causes of health care inefficiency. To remedy them, we need an operational mindset that transcends politics to convert institutionalized bad habits into business best practice.
We believe that by putting five proven strategies into effect to address the worst of those bad habits, the health care industry can cut its costs by 5 percent a year, an achievement that over a 10-year period would save the nation an impressive $3.6 trillion.
It starts with curbing waste. In a recent study, researchers at Thomson Reuters found that $700 billion is wasted each year on systemic inefficiencies such as unnecessary treatments, redundant tests and a lack of coordination among providers, as well as outright fraud. If nothing changes, U.S. health care expenditures will reach $4.8 trillion in a decade, or 19.7 percent of GDP, with $1.6 trillion of that doing nothing to contribute to better health.
However, many hospitals, health systems, insurers, employers and government agencies are forging solutions, and we can learn from their example. To move that process along, we have published a new report that analyzes dozens of private and public sector efforts to reduce waste while maintaining or improving the quality of care. From that body of work, five strategies have emerged.
Empower health care consumers to make more informed decisions about their health care. There has been much ink spilled on this topic, but most of the popular arguments for consumer education have been too theoretical, comparing a patient battling disease to a consumer researching a used car. For a more practical alternative, consider that one large employer changed its benefit plan to provide a financial incentive for preventive care. As a result, preventive screenings increased and 20 percent of expectant mothers enrolled in Maternity Pre-Care, a program that delivered a return on investment of 2.4 to 1.
When health care providers lack access to patients medical records, the result can be duplication of tests and inappropriate treatments that cost up to $50 billion annually. Leading health care organizations have leapt ahead of health reform legislation to create incentives for the adoption of electronic medical records with the potential to solve this problem. New Yorks North Shore Hospital System on Long Island, for example, recently announced that it will pay up to $40,000 to each physician in its network who adopts its electronic health record-keeping system.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.