Wasting More

Today, we continue with the remaining forms of waste that are driving up healthcare costs in the U.S1.

Administrative Complexity

As you might suspect, this is the spending on overly bureaucratic procedures that must be followed that are needlessly complex and time-consuming. It comes also from a lack of standardized forms and procedures, duplication of paperwork, or reporting. An interesting study showed that American physicians accumulated almost 4 times more administrative costs than Canadian physicians that have just a single payer.

Pricing Failures

This type of waste does not mean just pricing mistakes where patients are charged more than they should be. It refers to market forces determining reasonable pricing in different regions of the country. We lack proper competitive markets in healthcare due to a lack of price transparency. For example, MRI and CT scan prices, which should be similar around the country due to just a small variation for different labor costs, vary tremendously and are multiples more expensive in the U.S. than other developed countries.


This category is fairly common. It is caused by our habits or comfort in following algorithms that have worked in the past. It can be provider preferences that ignore new evidence in favor of alternative, often better treatments. It may be more expensive therapies that have not been shown to be better than a cheaper alternative. Overtreatment can also be caused by defensive medicine by over ordering tests, for example, to avoid lawsuits. It also includes end-of-life intensive care that is often futile or not necessarily desired by the patient.

Recently, the National Quality Forum has produced a list of specific clinical procedures that lack evidence of benefit to patients. Their next step is to get providers and payers to change practices accordingly. In 2012, CMS published a list of treatments or services that are overused, used incorrectly, or have minimal benefit, in the hopes of reducing ineffective care.

As I have said before, it is not necessarily easy to eliminate these forms of waste on a national level. However, we can bend the cost curve in our own medical community by making the commitment to adopt more efficient methods of practice. Again, the formation of a clinically integrated network gives us a good platform to reduce costs of care from multiple categories. Next time we will explore the costs of administrative burden in more detail, and how we may work together to benefit from possible economies of scale.

1Reducing Waste in Healthcare, Health Policy Brief. Robert Wood Johnson Foundation, Dec. 13, 2012.