Given how massive and interconnected the U.S. healthcare environment is, it’s understandable there’ll always be some waste. With so many moving parts — hospitals, research facilities, private practices, pharmaceutical firms, insurance agencies and more — there are many opportunities for inefficiencies to emerge.

However, it may surprise you to learn that waste accounts for an estimated 25 percent of total healthcare spending in America — between $760 billion and $935 billion annually.

Let’s take a closer look at why it’s so important to prioritize reducing waste in the U.S. healthcare industry — a goal that can benefit individuals and organizations alike.

What Does Healthcare Industry Waste Look Like?

Becker’s Hospital Review offers a concrete look at some specific forms of waste in healthcare:

  • Defects: Mistakes that require time spent on identifying and fixing errors, like tracking down a missing item from a surgical cart.
  • Overproduction: Doing more than what is needed, like superfluous diagnostic tests.
  • Transportation: Moving people or materials unnecessarily, which can be amplified by a poor layout.
  • Waiting: Patients, provider and administrators having to wait for the next event, like an appointment.
  • Inventory: Incurring extra costs to store and move more materials than necessary, like having to throw out expired medications.
  • Motion: Employees wasting time and energy moving throughout a poor layout, like a lab employee having to walk from one end of the building to the other many times per day.
  • Over-processing: Work performed that’s not aligned with patient needs or doesn’t contribute to the agreed-upon definition of quality, like putting extra data onto forms that’s never used.
  • Human potential: Employees may become burned out and reluctant to contribute to improvement if organizations fail to engage and support them.

That one-fourth of healthcare spend ends up wasted is a startling revelation, but there’s a silver lining: The experts who authored the study believe it’s possible to save $191 billion to $286 billion with interventions addressing these areas of waste. In other words, there is room for improvement here — and actions healthcare industry enterprises can take in an effort to minimize waste at every level.

Potential Strategies for Reducing Waste in Healthcare

Understanding the scope of waste is the first step toward taking action to reduce it.

Here were some more optimistic takeaways from the study:

  • The transition to value-based arrangements could reduce waste.
  • Payer health system collaboration to improve care coordination and care transitions could boost safety and reduce failures.
  • More closely aligning payers and providers could help reduce instances of fraud and abuse, as well as minimizing low-value care.

Value-based healthcare is a model under which providers receive reimbursement based on the quality of care as measured by certain metrics — like lowering readmissions, taking preventative care measures and utilizing certain types of health technology. Providers are also incentivized to keep costs low while still providing top-notch care.

This shifts the focus from the longstanding fee-for-service model — which based reimbursement calculations on the volume of services rendered for patients and the number of patients seen — to one where outcomes are prioritized. Thus, the emphasis is largely switching from quantity to quality, which can reduce wastage in that there’s less incentive for healthcare providers to order extraneous tests or keep striving to bring in more and more patients.

Under value-based care, it behooves healthcare organizations to do everything they can to streamline their services and boost patient outcomes, using the advanced healthcare data analytics available today to identify areas ripe for improvement based on patient and procedural data.

Artificial intelligence-driven analytics platforms empower healthcare organizations to synthesize data from sources like Electronic Health Records (EHR), insurance claims data and administrative management systems. This ensures providers have the tools they need to make cost-effective, evidence-based decisions every time.

The more deeply clinicians, researchers, administrators and insurers can dig into what the data is telling them about their workflows, the better they’re able to identify instances of waste and address them.

It’s clear we can all benefit from efforts to reduce waste in the U.S. healthcare industry — and the first step is understanding the scope of the problem and identifying opportunities to tighten up operations across the board.