5 Ways to Address the Growing Healthcare Efficiency Crisis

Harvard’s Dr. Michael Porter defines value in health care with the equation { value = outcomes/cost }. That seems pretty straightforward, yet efficiency in healthcare remains elusive. Healthcare organizations face an overwhelming challenge: providing safe care that produces good health outcomes in complex organizations with heavy patient loads, limited staffing, and tight financial resources.

By some estimates, the amount of waste from inefficiency in the US healthcare system is between 20 – 50%. The Institute of Medicine estimates that $785 billion or 31% of the $2.5 trillion spent in the US each year can be attributed to excessive costs. While this is clearly a problem now, the issue is undoubtedly going to get worse.

Factors Contributing to the Growing Problem

The Aging Population

The number of people aged 65 and over in the United States is estimated to be 83.7 million by 2050. The “Baby Boomers” earned their nickname with 10,000 Americans turning 65 every day for the next 20 years. In addition to the sheer number of older adults, people are living much longer. People who look at demographics, now assume that 50% of the people born after the start of the 21st century in the US and other industrialized countries will live to be at least 100 years old.

While it is great that people will live longer, the fact is that older people tend to develop more medical conditions and more complex needs. The healthcare system must grapple with the challenge of providing adequate and cost-effective care to the aged population over the decades to come.

The Ballooning Provider Shortage

The population in the United States is expected to grow by nearly 12% from about 328 million on January 1, 2019, to 359 million by 2030. Unfortunately, studies predict that the demand for healthcare providers will grow faster than supply, creating a projected delta of between 40,800 and 104,900 physicians by the time 2030 rolls around. Researchers expect gaps in every area of healthcare.

An Increase in Chronic Conditions

The National Health Council estimates that there are 117 million Americans affected by chronic conditions like heart disease, cancer, stroke, type-2 diabetes, arthritis, depression, and obesity. People living with chronic conditions represent 81% of hospital admissions, 76% of physician visits, and 91% of all prescriptions filled. The number of those affected is expected to grow to 164 million people, nearly half of the population, by 2025.

Given the tightening of resources in a growing and an aging population with more complicated conditions, using every resource efficiently will become critical not just to keep costs in check, but also to ensure the safety of patients.

But how can it be done? While the path to healthcare efficiency is long and winding, some approaches will certainly be essential to the solution.

5 Ways to Achieve Value in Healthcare

Leverage Health Information Technology

Health information technology is a broad category of technology applied to health and health care. It involves health information management across digital systems and the secure exchange of health information between patients, providers, payers, and quality administrators. Examples include electronic health records, telemedicine, clinical decision support, remote patient monitoring, automated dispensing cabinets, store and forward technology, computerized physician order entry, bar-coding at medication administration, and smart medication carts.  

According to HHS.gov, “Widespread use of health IT within the health care industry will improve the quality of health care, prevent medical errors, reduce health care costs, increase administrative efficiencies, decrease paperwork, and expand access to affordable health care.”

Reduce Clinical Errors

While it is impossible to eliminate all errors in medicine, enforcing standards and best practices can significantly improve safety and outcomes for patients. Mistakes like incorrectly administered medications and surgical site infections are far too common. Recent studies of medical errors have estimated they may account for as many as 251,000 deaths each year in the US, making medical errors the third leading cause of death. One in ten patients is affected by preventable errors during treatment, with more than 10% of hospital spending allocated to correcting these problems.  

Just like a factory seeks to eliminate problems that result in defective products, the healthcare system must find ways to build quality into every process, especially those that are error-prone such as medication delivery in hospitals.

Simplify Administration

In a Commonwealth Fund study, researchers found that administrative costs accounted for 25 percent of hospital spending in the United States (more than $200 billion), more than twice the proportion seen in Canada and Scotland. The study found no apparent link between administrative spending and the quality of care.

The problem in the US is complicated by a host of private insurers, government regulations, and rules designed to eliminate fraud and reduce errors.  Health IT has a role to play in streamlining healthcare administration. In addition, policymakers, healthcare administrators, providers, and payers will need to work together to ensure that each administrative requirement is necessary, thoughtfully applied, and ultimately beneficial to patients.

Combat Fraud and Abuse

Fraud and abuse in healthcare take many forms including everything from falsifying insurance claims, billing for more expensive services than needed, taking kickbacks from drug companies, performing unnecessary procedures and tests, and the severe problem of drug diversion. While the majority of fraud is committed by organized crime and a small number of corrupt providers, the problem is enormous. The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year.

Improve Hospital Workflow

Many hospitals and other healthcare organizations are applying the lessons learned in manufacturing to process improvement practices. Methodologies such as Six Sigma and Lean, which seek to improve the flow of value and remove waste are being applied in promising ways to reduce errors and cost.

One example is the change from storing patient medications in centralized dispensing rooms to bedside storage and administration of medications. This approach allows nursing staff to spend more time with patients, reduces the risk of administering the wrong medication to the wrong patient, improves pharmacy control over drugs, and decreases the opportunity for drug diversion.  This type of improvement can be applied to hundreds of processes in hospitals to improve both patient outcomes and value.

There is no simple solution to the healthcare efficiency crisis we face, but the thoughtful application of these solutions can make a big difference. In any field, there must be a goal that ties together the interests of all stakeholders. In healthcare, delivering high value for patients is one that unites all involved.