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What is 'waste' in medicine?

People tend to be skeptical that there's much waste in the health-care system. After all, these are profit-making companies. They might have a bit of fat, but presumably not too much.

They're right. Sort of. As it stands, to a hospital or a physician's office, wasted treatments are not wasted at all. They're profit. David Leonhardt explains:

Even more important than how we choose our health care, though, is how we pay for it. One of Deming’s principles is that improving quality also tends to reduce costs. That is not always the case in health care; expensive treatments — implantable cardiac defibrillators, for instance — can bring enormous benefits. But Deming’s principle holds more often than you might think. When in doubt about the best procedure, doctors tend to do more — more tests, more procedures, more surgery. So if a hospital does a rigorous analysis of what actually works, it is likely to discover a fair amount of waste.

But in our current health-care system, there is no virtuous cycle of innovation, success and expansion. When Intermountain standardized lung care for premature babies, it not only cut the number who went on a ventilator by more than 75 percent; it also reduced costs by hundreds of thousands of dollars a year. Perversely, Intermountain’s revenues were reduced by even more. Altogether, Intermountain lost $329,000. Thanks to the fee-for-service system, the hospital had been making money off substandard care. And by improving care — by reducing the number of babies on ventilators — it lost money. As James tartly said, “We got screwed pretty badly on that.” The story is not all that unusual at Intermountain, either. That is why a hospital cannot do as Toyota did and squeeze its rivals by offering better, less-expensive care.

This isn't as simple as cutting out waste. The real project here is getting the medical system to define waste the same way consumers define waste: treatments that don't help people, and in fact hurt the bottom line. As it is, those treatments currently help the bottom line, and so are no more wasteful for the institution than a Best Buy salesman persuading you to buy an expensive HDMI cable you don't need.

Before we can cut waste from the system, we need to agree on what waste is.

By Ezra Klein  |  November 12, 2009; 12:10 PM ET
 
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Comments

That whole article is well worth reading for people who care about the "how" of bending the cost curve.

Posted by: etdean1 | November 12, 2009 1:39 PM | Report abuse

This is why $500 billion cut from Medicare waste is the same thing as $500 billion cut from Medicare. It's just marketing.

Posted by: bmull | November 12, 2009 7:30 PM | Report abuse

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