Using Claims Data To Identify Healthcare Wasteful Spending
Milliman MedInsight® Health Waste Calculator
Healthcare waste—defined as tests or procedures that don’t improve health—accounts for a large proportion of medical care, with some experts, such as the National Academy of Medicine, estimating that onethird of all healthcare dollars are misspent. In fact, using the Milliman MedInsight® Health Waste Calculator, the Washington Health Alliance showed that 45% of utilization for a cohort of 47 healthcare services could be considered wasteful. That equates to an estimated $282 million.
HOW DOES MILLIMAN’S MEDINSIGHT® HEALTH WASTE CALCULATOR DEFINE “WASTEFUL SPENDING”?
AN: The way we identified actual “waste” was by asking, “Is this service supported by evidence; is it truly necessary in this context; is it not duplicative; and is it as free from harm as possible?” To answer those questions, our consultants looked to experts such as the American Board of Internal Medicine and the U.S. Preventive Services Task Force to see what they consider wasteful healthcare services. Then we analyzed claims data for 2.4 million insured Washingtonians using the Health Waste Calculator, our evidence-based claims analysis tool that classifies healthcare services as high value and low value in the context of care.
WHAT WERE THE FINDINGS OF THIS WASTE ANALYSIS FOR WASHINGTON?
AN: One clear finding of our analysis was that as a culture, we’re doing too many needless preoperative tests for lowrisk surgeries on otherwise healthy adults. For example, we do a lot of laboratory studies, EKGs, chest X-rays, and pulmonary function testing for low risk patients before low risk surgeries. In many cases, these types of tests don’t actually inform the care, yet can delay necessary procedures and result in a cascade of unnecessary tests. This one measure alone impacts well over 100,000 people a year in Washington State, costing patients and insurers tens of millions of dollars.
DID ANY OF THE FINDINGS FROM THIS WASTE ANALYSIS SURPRISE YOU?
AN: One of the findings was that the majority of the waste came from low-cost, commonly used services rather than high-cost services. Insurers focus a lot of attention on high-cost, low-frequency services, while this analysis shows there is value in trying to eliminate unnecessary low-cost items as well. While many quality improvement efforts aim at decreasing underuse (for example, increasing disease screening), the Health Waste Calculator shows that also decreasing overuse (for example too frequent screening or screening the wrong population) has the potential to reduce unnecessary spending and protect patients from unnecessary harm.
HOW DOES THE HEALTH WASTE CALCULATOR WORK?
AN: In the Washington Health Alliance project, the Waste Calculator looked at 47 measures for services identified by the American Board of Internal Medicine’s Choosing Wisely ® initiative as potentially wasteful procedures and tests -services that are either duplicative, harmful for patients, or that the evidence shows are not necessary. The Health Waste Calculator coded those recommendations so that clients can quantify those services based on claims data. The Health Waste Calculator combs through claims looking for certain services and, based on criteria and evidence it finds, it categorizes service as not wasteful, likely wasteful or wasteful and quantifies the opportunity by category of waste.
HOW EFFECTIVE IS THE HEALTH WASTE CALCULATOR AT IDENTIFYING WASTE?
AN: Typically, the Health Waste Calculator identifies around 1% to 3% of total healthcare spending as waste. While that may not seem like a lot, in a world where health insurers are looking for incremental savings opportunities, this is a huge opportunity. In addition to identifying real savings, the Health Waste Calculator also helps raise our collective health IQ around when tests and procedures are worthwhile versus when they are wasteful or may even cause harm to the patient.
WHAT CAN PAYERS AND AT-RISK PROVIDERS DO DIFFERENTLY AS A RESULT OF THE FINDINGS OF THE HEALTH WASTE CALCULATOR?
AN: At its core, the Health Waste Calculator enables payers and providers to identify unnecessary tests and procedures, which is important information they can use in designing programs aimed at reducing waste. The results can also be used to identify providers who practice more effectively by avoiding unnecessary utilization. That information can be used in steerage and referral programs. Providers can gain awareness of their own prescribing habits and best practices. Reducing unnecessary and wasteful healthcare utilization and associated costs is essential to ensuring we have a sustainable healthcare system. Products like the Health Waste Calculator are an important step forward in that fight.