he U.S. spends a large fortune on healthcare every year – about $4 trillion, to be exact. Unfortunately, not all of this money is spent wisely. About one of every four dollars spent on healthcare is wasted; that is nearly $1 trillion wasted annually. This waste is factored into the cost of premiums, meaning that a portion of the premium adds no value to actual health outcomes. On top of this, healthcare is already not affordable to many, leading to millions of uninsured and underinsured Americans. Prior to the Affordable Care Act (ACA), there were 30 million uninsured Americans; yet, healthcare coverage for these Americans would cost less than $300 billion. Therefore, just a portion of the waste could cover the underinsured and uninsured, while also reducing the cost of premium for all Americans. This would help reduce the national disease burden, which is beneficial for the entire country.
The way that U.S. healthcare is organized, paid and delivered involves immense amounts of operational, administrative, clinical, financial and compliance transactions, creating a transaction-intensive industry. Additionally, these transactions generate an enormous amount of historical and concurrent data. So, until we meaningfully integrate all sources of data to make the transactions more intelligent and cost-effective throughout the care continuum, the amount of waste will stay high, and Americans will continue to suffer. Here's how we can fix the waste issue plaguing the American healthcare system.
The breakdown of wasteful healthcare spending
There are three main buckets into which the billions of wasteful healthcare dollars fall. These three buckets are, broadly speaking: unnecessary administrative wastage ($100 billion), physician/hospital abuse, misuse and incompetence ($400 billion) and unnecessary drug-impacted medical costs and lack of at-home care management ($400 billion).
While this may seem to be an insurmountable number, several factors create this wasteful spending. First, two main parties control the majority of how that $4 trillion is spent: the payers (e.g. private insurers, Medicare and Medicaid) and the pharmacy benefit managers (PBMs). Because they determine how the money is spent, these two industries exert an enormous amount of control over how healthcare is managed and how the industry works overall.
For decades now, the payer and PBM industries have relied on legacy platform foundations that are not only fragmented but also have intensive human capital requirements to operate. With entire processes and workforces built on managing the transactional tasks around the existing legacy platforms, it is no wonder that the healthcare industry has resisted modernization. Thus, the journey towards eliminating healthcare waste begins with a technology revolution and rapid adoption.
Payers and PBMs: two legacy industries in need of a tech revolution
The power that payers and PBMs wield is particularly relevant to the question of waste in the healthcare system, because both industries are significantly antiquated and need transformation. Despite the advances in technology over the decades, the healthcare industry and its platforms did not evolve with it. As a result of this lag, the technological gap is insurmountable for these legacy platforms. Therefore, not only do these old platforms not communicate with each other, but they also have little to no ability to leverage new technologies, like robotic process automation (RPA), machine learning (ML) and artificial intelligence (AI).
To support the U.S. healthcare structure, the vast business operational footprint requires payers to have 15-20 different departments to handle the 2,000 to 3,000 administrative, financial, clinical and compliance transactional tasks at different stages in healthcare delivery and management. The same is often true with PBMs. Because the legacy systems are so fragmented and operate on antiquated technology, many of these tasks are manual and are unable to deliver actionable intelligence at each point-of-care. With all of this disjointed transaction processing, you can see how we can quickly arrive at almost $1 trillion in waste.
Handicapped by legacy technologies, the healthcare industry does not operate efficiently and intelligently, thereby driving up operational and unnecessary medical costs. Since these two industries determine everything from how services, drugs and care supplies are priced to how care is delivered, the lack of cost and quality accountability creates a ripple effect that spreads across the care continuum.
Automation is an unprecedented opportunity
The key to addressing these cumbersome processes is automation. By deploying interoperable modern platforms between the different stakeholders responsible for managing the care to a patient, we could significantly cut out the amount of administrative waste it takes to complete these transactions while also reducing unnecessary medical costs. Such automation could replace much of the human capital required to make legacy systems work, and that talent could then be repurposed across the organization where a human touch is required. This repurposed human capital could be used to influence physician, hospital and any care delivery facility’s practice patterns and accountability and also manage at-home chronic care patients for improved quality and health outcomes.
Of course, the patient is the one most affected by this. The disjointed nature of today's healthcare industry means physicians, pharmacists or other care delivery stakeholders in the care continuum don't have ready access to a 360-degree view of the patient. These transactional systems hold and generate immense amounts of historical and concurrent data on patients, physicians, care delivery and outcomes. However, the fragmented legacy systems are incapable of leveraging this data for the real-time analysis required at the point of care, leading to disjointed care.
The problem is only exacerbated when we consider care management at home. Approximately 5% of the population makes up 50% of total healthcare spending, the unmanaged portion of managed care. The patients with chronic conditions, mental impairments or those who require care around the clock could see significant improvement in the quality and timeliness of their care if platform-driven automated processes were used to manage their care. This would help reduce the cognitive load on care stakeholders to correctly care for their patients’ conditions. And by using artificial intelligence and machine learning, it would even help to identify opportunities for optimized and improved care. This would not only streamline care management for the patients at home so that they can reduce hospital visits, but it would also allow for care stakeholders to proactively care for patients. This would lead to improved health outcomes, better provider quality and reduced opportunities for human error.
We need to integrate our care
The healthcare industry has to do a better job of integrating care, and RPA and AI can help with this. With the technology available today, there's no reason that platforms cannot evolve to derive and deliver actionable intelligence at every point of care without provider workflow disruption for any patient. In addition, platforms built on cloud-native architecture can help automate the billions of transactions and analyses and derive actionable intelligence across PBMs and payers. Although legacy systems can migrate onto public clouds, such as Amazon Web Services or Microsoft Azure, only cloud-native platforms can take advantage of the on-demand computational power available in public clouds. Simply upgrading these legacy systems and migrating onto the cloud leads only to the superficial digitization of healthcare.
Imagine if we were able to successfully integrate actionable intelligence at each point of care for the patient. Patients would see more accurate and accountable care, and, ultimately, a more comprehensive care delivery from their provider. This would substantially reduce the burden on physicians and other care delivery stakeholders, thus also helping prevent burnout. Most importantly, however, it would help us better allocate our resources to get the proper care to the patients who need it, when they need it and how they need it, which, after all, should be the primary objective of our healthcare system.
Payers and PBMs are aggregators of care and need a more robust management platform that can handle more than just immense transactional tasks. The platform must incorporate automation and AI to not only optimize human capital but also to empower care providers with comprehensive, real-time actionable intelligence derived from historical and concurrent care data. This would minimize waste and reduce the national disease burden. The technology revolution is simply the first stepping stone to eliminating healthcare waste. However, healthcare transformation must go beyond just technology. Accountable care through risk-sharing across the care continuum is another opportunity for eliminating healthcare waste.