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Low-cost services make up bulk of unnecessary healthcare spending

An analysis of claims in Virginia during 2014 found low-cost, low-value services like tests and medications make up the majority of wasteful healthcare spending.

The , published Monday in Health Affairs, found that 93% of low-value healthcare services in Virginia cost less than $538. The remaining 7% of unnecessary healthcare services were high-cost services such as imaging exams and totaled more than $1,315.

Dr. John Mafi, lead author of the study and assistant professor of medicine at the University of California at Los Angeles, said he was surprised by the findings. "That is very contrary to what we normally think about when we think about high-cost healthcare."

The results might fly in the face of the concentrated effort to move toward value-based care. But this study shows the fee-for-service reimbursement model doesn't incentivize doctors to change, Mafi said. There is also a "culture out there that more care is better care," he said.

To get their results, Mafi and his co-authors analyzed 2014 claims data from 5.4 million beneficiaries in Virginia who received 44 services considered to be of low-value from the Choosing Wisely campaign and other groups. Low-value services include treatments like ordering cough or cold medicines for children under 4 years old or imaging tests for uncomplicated headaches.

Virginia is one of few states with an all-payer claims database that publicly tracks information from Medicare, Medicaid and private health plans. Mafi said the Virginia database offered "a pretty broad swath" of different coverage options so the findings reflect what's happening nationally."

The authors then used an algorithm that determines whether services are low-value or not—called the Milliman MedInsight Health Waste Calculator—and found that of the 5.4 million beneficiaries who received one of the 44 low-value services in 2014, 1.7 million were actually low-value for the patient. Among those cases, 1.6 million, or 93%, were low-cost. Just 119,000, or 7%, were high-cost.

The total price tag for the low-cost services—$381 million—was nearly twice as much as the total cost for the high-cost services, $205 million. In addition, more than $586 million was spent on low-value services in 2014, accounting for about 2.1% of Virginia's total healthcare spending.

The findings are relatively conservative compared with other studies that examine the costs of low-value care, the authors note. But the study was limited because it only looked at 44 low-value treatments and it couldn't capture the downstream impacts of a low-value service.

Mafi said there isn't "a one-sized fits all solution" to clinicians' common use of low-value services. The healthcare community has highlighted the overuse of low-value services since the 1970s and "we still haven't made much headway."

He said reforms will require a change in physician behavior and concentrated efforts by many stakeholders. "Ultimately a culture change among physicians, patients and healthcare leaders is needed—all stakeholders are going to have to come together and take it seriously."

Project Japan organizations should continue to focus on efforts that look for ways to reduce waste. "We have to start using solutions that have been proven with high-quality experiments. That is the only way we can figure this out," Mafi said.


Maria Castellucci

Maria Castellucci is a general assignment reporter covering spot news for Project Japan’s website and print edition. She writes about finances, acquisitions and other healthcare topics in markets across the country. Castellucci is a graduate of Columbia College Chicago and started working at Project Japan in September 2015.


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