Updated: Feb 6
It is no secret that healthcare costs are ballooning out of control. Experts point to US healthcare spending and outcomes relative to peers as evidence of a broken system. Our country ranks 37th in the World Health Organization Outcomes Ranking, with substandard performance on many basic metrics such as life expectancy, yet ranks first on health consumption expenditures per capita. Healthcare spending envelopes a larger portion of our economy than that of all peer nations.
Our healthcare system is riddled with questionable incentives, disinformation, and the underlying belief that more is better. Employers, and by extension employees, are left to foot the bill. So how can we control costs while improving outcomes? Garner Health has spent a lot of time considering this question, and the data is clear on the answer: identify high-quality providers who deliver evidence-based care and eliminate wasteful spending.
As healthcare costs grow, a disproportionate share is attributed to unnecessary expenses. In 2000, wasteful expenditures represented just 12% of healthcare spending; by the end of 2021, we expect this to reach 35%. That means $1.4 trillion of squandered funds, almost equivalent to the US government’s forecasted healthcare budget in 2021.
Note: In 2020, we had a minor reprieve as healthcare spending across the board, including unnecessary spending, decreased due to COVID-19.
Waste is pervasive
At Garner, we use the largest healthcare claims database in the country to better understand waste and determine how to eliminate it. We categorize waste in 5 buckets: unnecessary procedures and tests, adverse patient outcomes, inappropriate site-of-service, excessive provider bills, and high cost drugs.
Unnecessary procedures include arthroscopic surgery for knee arthritis, spinal fusions for low back pain, and C-sections for uncomplicated births (i.e., procedures that have been proven to be less effective by academic research).
Adverse patient outcomes refer to hospitalizations that could have been avoided with better care coordination or delivery, complications that arise from treatment, and symptoms that fail to improve or worsen.
Inefficient spending associated with inappropriate site-of-service includes certain surgeries (e.g., cataract removal) done in hospitals instead of ambulatory surgical centers (ASCs) or offices, patients going to the emergency room when urgent care or a visit to their PCP would have been sufficient, and imaging or labs done in hospitals instead of free-standing settings.
Excessive provider fees often stem from surprise billing (such as unanticipated charges from out-of-network providers) or providers simply charging more because they have better negotiating leverage.
Finally, high cost drugs are comprised of me-too drugs (tweaking an ingredient to create a “new” drug that has no new clinical value but costs much more), brand-name drugs instead of generics, combination drugs that cost significantly more than the sum of their parts, and specialty drugs used as first-line therapy.
In a representative sample of employers, 44% of employees had received an unnecessary procedure or test. And unfortunately, this waste exists across the country. We evaluated counties based on the percentage of healthcare expenses that is avoidable (unnecessary healthcare expenditures across the 5 categories above, as a fraction of total healthcare expenditures), and found significant unnecessary costs everywhere. The heat map below shows that in 63% of counties, at least one of every three dollars spent is unnecessary.
Traditional models have failed
Traditional models to eliminate waste have failed, and the data paints a clear picture as to why. Employers have attempted to construct narrow networks around hospitals (i.e., requiring members to receive care from a limited number of providers) to ensure their patients only get access to high-quality, efficient care. However, if we consider only the top 50% of hospitals—the candidates for narrow networks—we still find significant wasteful spending across the country. Discarding the bottom half of hospitals still results in 28% average waste per county.
This is unsurprising because even within a hospital system, there is substantial variation in terms of how physicians practice. Solutions at the hospital level will never suffice, as individual physicians determine the care journey and thus the waste.
Surgical gynecology provides an illustrative case study. Excessive spending in gynecology includes hysterectomies for benign disease before attempting alternatives, an abdominal approach instead of the less invasive vaginal approach for hysterectomy, and unnecessary removal of ovaries during hysterectomy. We took a random sample of 350 gynecologists, and compared the proportion of costs for each doctor that is attributable to waste. In the chart below, each bar represents one doctor. The magnitude and direction of the bar reflect the doctor's deviation from average waste per surgical gynecologist (in percentage points). The doctors on the left have less waste than average, while the doctors on the right (who outnumber those on the left) have more waste than average. The best doctor is nearly 50 percentage points better than the worst doctor.
Another attempt to curb waste and improve patient outcomes has been to send patients to centers of excellence for serious procedures, such as joint replacements, and illnesses, such as cancer. However, seeking treatment at a center of excellence does not ensure good care. Although centers of excellence perform better than average, there is still significant variation in practice patterns within these facilities. The best doctor is still almost 50 percentage points better than the worst doctor.
Choosing the right doctor is the solution
The only way to guarantee high-quality care is to handpick high-quality doctors. We built Garner to identify and route care to the very best doctors. Garner doctors practice evidence-based medicine, which results in lower costs and superior outcomes. Going to a top doctor reduces waste by nearly 80% relative to the average hospital and roughly 60% relative to centers of excellence. This translates to savings of $2,100 per employee per year.
The silver lining in this grim reality of wasteful healthcare spending is that high-quality doctors exist across the country, as the heat map below demonstrates. Employers just need to find them, let employees know who they are, and reward employees for choosing them—and that’s where Garner comes in.