Clinical Waste (or “I went ahead and threw rust proofing in with that physical”)

This is the second in a three part overview of the major contributors to “wasteful” healthcare spending in the US (estimated to be in the ballpark of $1 trillion annually). This installment cues up more in-depth discussions to come regarding complications which spring from poor decisions and policies at the time of treating disease (i.e., defensive medicine to avoid medical prosecution, medical errors, preventable readmissions, etc.).

Overview: The clinic is where the rubber meets the road in healthcare. This is where tests are run, surgeries go down, prescriptions are written, and where invaluable motivation, instructions and advice are dispensed by physicians. These are crucial touch-points that can lead to weak performance across the healthcare system or serve as sites of massive cost sinks if mismanaged. The waste in the clinic can be thought of in a couple ways: the extra spending due to defensive medicine (typically driven by rather unconscionable trial lawyers) and costs due to a lack of standards of care and sharing of best practices (where physician associations, hospital administrators, and government agencies are all responsible for their inability to generate the data or drive necessary to reach and share these standards).

Defensive Medicine

The biggest estimated source of waste that comes out of the process of treating patients springs from the widespread practice of “defensive medicine.” You can’t really blame physicians for testing the heck out of their patients – there is an army of trial lawyers in the US like this guy waiting to pounce on any potential physician misstep (real or otherwise) to line their pockets. Americans are known worldwide for a lawsuit-happy culture. I recall riding a tour bus out of London, listening to our guide tell us to “Buckle your seatbelts. I repeat – just for the Americans on the bus – buckle your seatbelts: I told you twice: now you can’t sue me!” In terms of medical malpractice, this stereotype is more than warranted. (By the way, this tour guide was the man. He shared some very funny Winston Churchill quotes. Is it just me, or are all British people genuinely hilarious. How do people that never laugh get to be so funny?)

The costs to the system here are threefold: costly and unnecessary tests, increased malpractice insurance costs, and actual settlement payouts resulting from bogus cases. These things all directly or indirectly raise the cost of healthcare. So why not take a shot a tort reform? Well, why not take quit your job, move to Hawaii and buy your own island paradise? Because of money: Congress (primarily Democratic lawmakers) has been bought by the trials lawyers that profit from medical malpractice suits, so much so that tort reform was effectively off the table during the current round of healthcare reform (see more here). All despite a Congressional Budget Office report that stated tort reform could save the federal government billions of dollars per year.

The solutions to unlock savings here can be approached through three waves:

• Near-term (Government/ Voter-led solutions): State and federal governments should enact tort reform : i.e., demand special courts with medically knowledgeable judges making decisions (as opposed to juries with no expertise deciding cases on emotion over science), as well as caps on noneconomic damages like pain and suffering.
• Medium-term (Government/ Physician-led solutions): Physician associations and government bodies should take the lead to gather extensive data and determine definitive answers regarding what treatments are most effective for specific patient sets and disease states. By providing proof of following these instructions, or a justifiable rationale for not doing so as set out in their guidelines, physicians could be better defended in the court of law.
• Long-term (Startup/ Enterprise-led solutions). Medicine must evolve from art to a science: better tests and knowledge of the patient should dictate a more perfect, indisputable treatment that a physician can’t be faulted for performing. Advances in robotics and medication efficacy should also lower incidents of actual physician error where malpractice cases are warranted.

Other types of clinical waste

Whereas defensive medicine is more of a “woe-is-me” tale for doctors, the other types of clinical waste can largely be attributed to them and others in the medical profession – medical errors, poor coordination amongst they and their peers, treatment variations due to an inability to hold themselves to common standards, etc. I’d also argue that several doctors engage more generally in ‘over-testing’ and ‘over-treating’ at times, where instead of being defensive, they simply want to gain reimbursement for a quick though unnecessary task (which further highlights the perverse dilemma that US doctors make more from keeping patients sick than making them healthy).

There are quite a few smaller (relatively speaking!) buckets here, and each is worthy of its own dissection. But generally, solutions to these issues must include:

• Agreed-upon standards of care (Government/ Physician-led solutions): As above, physician associations and government bodies should agree upon most effective treatments, and under what conditions one may override them. This should also include public health decisions which restrict the overuse of antibiotics and widespread adoption of techniques to avoid staph and other typical hospital-bred infections.
• Better front-line care (Physician/Patient/Payer/Startup-led solutions): A stronger reliance on primary care physicians, along with better doctor-patient communication, can help prevent unnecessary ER visits and help ensure ideal ongoing treatment of chronic disease to avoid complications and hospital readmission. Interestingly, several startups (see here and here) are also tackling the task of connecting patients with primary care physicians via web- and phone-based systems in an attempt to increase the levels of communication and lower the cost and time required for a medical checkup.
• Improved technology (Startup/ Enterprise-led solutions): More effective, targeted treatments can actually help physicians agree on obvious standards of care. And innovations in things like surgical robotics can cut down on the incidence of medical errors.

Diagnostic and Therapeutic Innovation

Something not included in the chart above given it would be impossible to size, but should technically be considered in this category, are cost savings possible through better treatments versus those common today. This would include better diagnostics to determine when expensive treatments are not necessary, better patient information (lifestyle factors, genomic details, and treatment histories) to better diagnose diseases and gauge treatment efficacy, and new low-cost, high-efficacy treatments that work better than current ones and deliver lower likelihoods of disease recurrence. These solutions will almost surely come from well-funded startups built around exciting new innovations most likely growing out of academic labs. The personalized medicine revolution and associated disruptive medical technologies fit this mold.

Next Steps: We’ll go in depth into each of the big sources of wastes and potential solutions, calling out more specialized considerations, and give some examples of trend-setting entrepreneurs.

Discussion Topic: What do you think about these problems and potential solutions? Are you or someone you know involved in startups operating in this space? Please feel free to let me know!