PwC puts a price tag on waste in healthcare spending

PricewaterhouseCoopers recently released their report The Price of Excess: Identifying waste in healthcare spending, in which they classified health system inefficiencies into three “wastebaskets” that are driving up costs:

1. Behavioral where individual behaviors are shown to lead to health problems, and have potential opportunities for earlier, non-medical interventions.
2. Clinical where medical care itself is considered inappropriate, entailing overuse, misuse or under-use of particular interventions, missed opportunities for earlier interventions, and overt errors leading to quality problems for the patient, plus cost and rework.
3. Operational where administrative or other business processes appear to add costs without creating value.

PwC states that "when added together, the opportunities for eliminating wasteful spending add up to as much as $1.2 trillion." The price tags they apply include:

• Behavioral $303 to $493 billion
• Clinical $312 billion
• Operational $126 billion to $315 billion

The top three specifc areas of wasted spending are defensive medicine ($210 billion annually), inefficient claims processing (up to $210 billion annually) and care spent on preventable conditions related to obesity and overweight ($200 billion annually).

Regarding the operational "wastebasket", PwC lists its contents and costs as including:

• Claims processing $21 to $210 billion
• Ineffective use of IT $81 to $88 billion
• Staffing Turnover $21 billion
• Paper prescriptitons $4 billion

The PwC report spends much more time identifying and measuring the waste, than discussing exactly how to eliminate it, but page 13 of the 22 page report does discuss barriers to eliminating waste, and page 14 does present their "Call to Action" to "create collaborative models and incentive systems that deliver value."