Healthcare spending in the US is expected to reach $4.8 trillion by 2021 accounting for 20% of its GPP, up from $2.6 trillion in 2010 (18% of GDP),[1] of which wasteful spending comprises 30%- 45%.

A 2012 study[2] estimated that five categories of wasteful services comprised between $476 -$992 billion, or 18-37% of approximately $2.8 trillion annual total US health spending in 2011.

Estimates of Waste in US Health Care Spending in 2011, by Category
Category Estimated Excess Spending ($ bn) % of Total Spending
Avoidable clinical services 210 9.15
Inefficient delivery protocols 130 5.66
Administrative inefficiencies 190 8.28
Non-competitive pricing 105 4.58
Lost prevention opportunities due to poor care coordination 55 2.40
Fraud 75 3.27
Total 765 33.33

Source: IOM, 2010

Bracing to face the changing financial landscape, the risk of dwindling reimbursements and the move towards value-based care, hospitals are increasingly realizing that they need to take immediate initiatives to develop models to identify avoidable care services and wasteful deployment of resources.

It is important to understand and analyze the factors that lead to cost escalations, before making an attempt to address them.

Leading causes of cost escalation

Leading causes of clinical cost escalation

How Big Data and Analytics Can Help Contain Costs

IT is increasingly playing a critical role in delivering financial benefits and enhancing care quality. Healthcare systems are turning to big data and advanced analytics to evaluate their technology, people and processes to identify possible sources of wasteful spending.

Many hospitals are revamping their care delivery processes, using Six Sigma, LEAN and other quality improvement techniques, to assess and address wasteful expenditures. With a process improvement protocol in place, physician groups work in tandem with analytics to reduce wasteful costs.

Research indicates that the following would be the leading IT activities to drive cost reduction initiatives over the next three years:

  • Integrating clinical and financial data
  • Analytics support for cost management tracking, and
  • Identifying and eliminating clinical process variations

With AcesoCloud’s suite of sophisticated cloud-based analytics solutions for sepsis care and management, hospitals can achieve excellent patient outcomes by delivering a higher quality of care and services. In many cases, analytics can be used for earlier identification of critical disease like Sepsis, and deployment of early evidence-based treatment and avoiding treatment-related cost escalation. In other cases, analytics tools are handy in administering a course of treatment and suggesting the most appropriate levels of antibiotics.

The analytics tools also offer clinical and operational decision support to process improvement and implementation teams, leading to significant reductions in length of stay, readmission, avoidable diagnostic tests, and hospital-acquired infections.

Analytics and Physician Groups Can Collaborate to Combat Costs and Improve Quality

Armed with ample analytics based evidence, insights and statistics, qualified and committed physicians, nurses, technicians, and analysts can be teamed to design, develop and execute process improvement and clinical care programs for quality and cost improvements. AcesoCloud’s analytics, collaboration and sepsis program management services are delivered on the cloud for physicians, nurses, administrators, and operations teams to collaboratively work on their sepsis programs and find improvements quickly.

[1] The Facts About Rising Health Care Costs

[2] Study by former Centers for Medicare and Medicaid Services (CMS) administrator Donald M. Berwick and RAND Corporation analyst Andrew D. Hackbarth