Low-Cost, Low-Value Healthcare Services Ripe for Reaping

Christopher Cheney, October 2, 2017

An analysis of Virginia insurance claims indicates there are practical opportunities to slash billions of dollars in wasteful healthcare spending nationwide, researchers say.

The best way to make deep cuts in healthcare spending is to start with reductions in low-cost, high-volume services, according to research published today in Health Affairs.

"An analysis of data for 2014 about forty-four low-value health services in the Virginia All Payer Claims Database revealed more than $586 million in unnecessary costs," wrote the authors of the research paper, "Low-Cost, High-Volume Health Services Contribute the Most to Unnecessary Health Spending."

The researchers examined fee-for-service claims from 5.5 million Medicare, Medicare Advantage, Medicaid, and private commercial insurance beneficiaries. The benchmark for a low-cost, low-value service was set at $538.

Several methodologies were used to assess service value, including the ABIM Foundation's Choosing Wisely campaign, the U.S. Preventive Services Task Force, and Medicare's Healthcare Effectiveness Data and Information Set. The researchers pegged the percentage of low-value healthcare services at 2.1% of total healthcare spending in Virginia.

"A substantial proportion of healthcare costs in the United States is allocated to low-value care, defined as patient care that provides no net health benefit in specific clinical scenarios—such as early diagnostic imaging for uncomplicated low-back pain. Despite decades of attention to this issue, U.S. expenditures on low-value care persist," the researchers wrote.

A key finding of the research was drawn from contrasting low-value services based on cost—showing that the total cost of spending on low-cost, low-value services was nearly double the spending on high-cost, low value services. "The total cost for the low- and very-low-cost low-value services (65 percent of costs, or $381 million) was nearly twice as much as the total cost of high- and very high-cost low-value services (35 percent of costs, or $205 million)," the researchers wrote.

This finding contradicts conventional wisdom.

"Although higher-cost low-value services are frequently showcased in policy deliberations and the media, lower-cost low-value services (those in the bottom two quartiles of our study) accounted for almost twice as much unnecessary cost as did services in the top two quartiles."

The researchers say their study has a pair practical implications in the nation's quest to cut healthcare spending:

  • Given that the researchers identified $586 million in wasteful spending in one state, "even a modest decrease in the use of low- and very-low cost low-value services could lead to savings and serve as a feasible strategy for catalyzing a broader movement to tackle low-value care."
  • Focusing on low-cost services "would not present a financial threat to any particular clinical specialty or advocacy group."

Low-cost, low-value services could be the best starting point in meaningful efforts to cut healthcare spending, the researchers wrote: "Instead of pursuing a politically charged strategy to reduce the use of high-profile and higher-cost low-value services, an alternative approach that initially targets the reduction of high-volume and less costly items might be a more strategic way to catalyze the movement to tackle the problem of low-value care."

 

Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.

Facebook icon
LinkedIn icon
Twitter icon