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Healthcare Waste & Inefficiency – an Inconvenient Truth?

Flushing Money Down The ToiletThe Iowa House and Senate leaders recently announced a joint budget agreement on spending levels for the state of Iowa’s 2015 fiscal year, which begins July 1, 2014. The budget target agreed upon? $6.97 billion – a great deal of money, for sure.

This amount, however, pales in comparison to the net worth of some of the billionaires around the world. For example, when compared to Forbes‘ latest list of the world’s billionaires, the announced 2015 Iowa budget would fall somewhere between #191 and #196 of the most wealthy people on the list. Bill Gates sits atop at $76 billion while Warren Buffett weighs in at the #4 position, with a ‘pithy’ net worth of $58.2 billion.

In short, Bill Gates’ net worth is 11 times greater than Iowa’s annual state budget. A fun fact to recite at tonight’s dinner table, right?

Try this not-so-fun fact: According to a 2010 report from Institute of Medicine (IOM), the U.S. healthcare system wastes about one-third of the $2.6 trillion we all spend on healthcare. This equates to about $765 billion wasted annually — and growing!

According to IOM, the six areas of waste and inefficiency are:

  • Missed Prevention Opportunities – $55 Billion
  • Unnecessary Services – $210 Billion
  • Inefficiently Delivered Services – $130 Billion
  • Prices that are Too High – $105 Billion
  • Excess Administrative Cost – $190 Billion
  • Fraud – $75 Billion

Based on these stats, one might reason that our health insurance premiums are about a third higher than they should be. No wonder our health premiums continue to increase more than the consumer price index, year-after-year! Let’s be honest, merely tweaking our insurance plans (by increasing deductibles, copayments, offering limited-provider networks, implementing value-based benefit plans, etc.) will NOT remotely make up the difference that we lose in annual waste.

It is about time that we confront this ‘inconvenient truth’ (thank you, Al Gore) and think differently about truly reforming our healthcare system.

To put the $765 billion of healthcare waste and inefficiency into context with other budgeted costs, consider the following:

So, the next time you wonder why your health insurance premiums and out-of-pocket healthcare costs are so high, you might remind yourself that we currently live with a VERY wasteful healthcare system that is in desperate need of an efficient and high-value care transformation.

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What do 1,100 Jumbo Jets and Preventable Medical Errors have in Common?

How about a quick quiz?

Trivia Question #1: How many passengers fit in a typical jumbo jet?

Answer: Generally between 350 and 450, so let’s say an average of 400 passengers.

Trivia Question #2: How many premature deaths occur in U.S. hospitals each year, associated with preventable medical errors?

Answer: According to a recent article in the Journal of Patient Safety, enough to fill 1,100 jumbo jets each year – which equates to approximately 440,000 passengers. This is not a typo. The article is titled, “A New, Evidence-based Estimate of Patient Harms Associated with Hospital Care.”

If remotely accurate, this statistic is both disturbing and entirely unacceptable!

Using the 2010 census, the population of five counties in the greater Des Moines metropolitan area (Polk, Dallas, Warren, Madison, and Guthrie) was 569,633 people. If this article is correct, the entire population of the Des Moines metro area would be gone in 15.5 months due to preventable hospital errors. This would quickly demand our collective attention, don’t you think? Why hasn’t this been reported by the media? It finally has — in this article, “To Make Hospitals Less deadly, A Dose of Data.”

If the Centers for Disease Control (CDC) were to include preventable medical errors in hospitals as a category, the conclusions found in this article would make it the third leading cause of death in the United States. Based on 2010 data, the CDC’s top five leading causes of death were:

  • Heart Disease – 597,689
  • Cancer – 574,743
  • Preventable Medical Errors Associated with Hospital Care – ~440,000
  • Chronic lower respiratory diseases – 138,080
  • Stroke (cerebrovascular diseases) – 129,476
  • Accidents (unintentional injuries) – 120,859

In 2000, the Institute of Medicine (IOM) published a seminal book, “To Err is Human.” This book revealed that as many as 98,000 people die every year due to medical errors. At the time, this number appeared to be bold – so bold that it was attacked by some. Now in 2013, another report suggests the IOM number is less than one-quarter of the true estimated casualties found in our nation’s hospitals.

I presume these medical errors occur regardless of having insurance coverage or not. Health insurance is certainly important for all Americans, but having it does not guarantee receiving safe care.

Without a doubt, Americans can agree that safe and efficient health care delivery is sorely needed. Having just one jumbo jet fall from the sky is entirely unacceptable.

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