AHPI Study Finds Up to 20 Percent Waste in Health Care Spending of Large Employers, Proposes Solutions

December 16, 2016

The American Health Policy Institute released its new study this week in collaboration with VBID Health, "Using Data-Driven Disruption to Reduce Wasteful Health Care Spending," which found that approximately 20 percent of total health care spending by large employers may be considered wasteful and unnecessary.  VBID Health assessed the health care spending patterns of 35 large, self-insured employers using the Health Waste Calculator, an analytical tool jointly developed by VBID Health and Milliman that is used to quantify and report on potentially wasteful health care expenditures.  VBID found approximately $2 billion in wasteful and unnecessary health care spending, or 20 percent of total spending, breaking the wasteful spending into four main categories: pharmacy; inpatient; outpatient; and administrative.  In response to these problems, VBID recommended five specific and actionable goals:

  • Using software such as the Health Waste Calculator to assess spending at micro levels on a per-member per-month (PMPM) basis, to develop specific PMPM spending targets, and to assess the results of specific interventions;
  • Implementing payment approaches that shift away from fee-for-service medicine in favor of value-based payments;
  • Revising plan designs to encourage healthy behavior and discourage unnecessary and inappropriate care;
  • Using predictive modeling to identify high risk patients by disease type and cost ranking; and
  • Ensuring that large employers take advantage of their combined purchasing power and economies of scale.