Critical Point podcast, Episode 1: Healthcare waste

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By David P. Mirkin | 13 June 2018


Disclaimer: This podcast is intended solely for educational purposes and presents information of a general nature. It is not intended to guide or determine any specific individual situation. And persons should consult qualified professionals before taking specific action. The views expressed in this podcast are those of the speakers and not those of Milliman.

Darren Harris: Hello and welcome to Critical Point brought to you by Milliman. I'm Darren Harris and I’ll be your host today. In this episode of Critical Point, we're going to be talking about healthcare waste.

Milliman has a unique perspective on healthcare waste and is working with clients to minimize waste and reduce unnecessary costs across the American healthcare system. Joining us today or three members of our MedInsight team: Jackie Sehr, Marcos Dachary, and Dr. David Mirkin. Jackie, do you want to kick us off?

Jackie Sehr: I wanted to start by talking to Dr. Mirkin and getting your perspective as a physician on the history of waste and how you’ve encountered waste of the past.

Dr. David Mirkin: Sure. Currently, I don't practice. I'm working as the chief medical officer of MedInsight. However, when I did practice, I practiced in rural Idaho. And the way I encountered waste, I think, is probably a little different than most physicians because my patients didn't have health insurance. They were farmers because I was in rural Idaho. They were farmers, dairy people. And, actually, fairly well-off people, but they were individuals and they decided they didn't want to purchase individual health insurance. So the way I encountered waste is they would come in and they would say, “This particular service-- what's it cost? And do my kids or do I really need it?” And so I had to begin to learn how much things cost. And essentially what the risk was of not doing things, sort of an early exposure to what we now call low value services. If it was something that really wasn't going to deliver much value to my patients, we would skip it. I would talk to them about it.

JS: Can you speak a little bit more about that, the difference between-- I mean how physicians view healthcare waste versus how probably the rest of the healthcare industry uses that waste?

DM: Well, I think, medicine is not a perfect science. So even though out of 100 physicians, probably 95 might consider a particular service delivered in a particular situation as being unnecessary medically, meaning it's “waste,”-- there are five who would not agree with that opinion. And so for those five, this not only is necessary, but it also provides income to them. It's very common among specialties because, again, there's a lot of disagreement among specialists regarding what services are necessary. If you're familiar with Choosing Wisely, when it started, various specialties were asked to identify wasteful services. And, of course, the first specialty to do so identified services done by other specialties. And the second specialty did the same. So, essentially, they're all pointing fingers elsewhere.

Marcos Dachary: I think the industry perceives waste as now being very pertinent. We’re talking about 18% of the GDP. So one of the things, again, Dr. Mirkin, your perspective was on providers. But I think this is a much bigger picture. And I think we’re seeing it now, well, hopefully, the country is seeing it as well to a bigger extent.

JS: Can you both discuss why it's so important to start identifying waste in a more meaningful way?

DM: I'll take the first stab at this. So my background is really from what we call the payer side. So I used to-- before joining Milliman and MedInsight, I was a corporate medical director for a large staff model health insurance company. And one of the things that we were always trying to do is we viewed ourselves as stewards of people's money who buy insurance for healthcare. We want to try to provide them as much healthcare as we could for a given price. So if there's waste being delivered by the healthcare delivery system, we have to pay for that. And, essentially, that then goes into how we would deliver or how we would calculate premium to charge people for health insurance. And if you followed-- previously when the percent of GDP being spent on healthcare was in the low teens, we were told that that was unsustainable. And that there was going to be a huge collapse of the economy because of that. Well now, I think, we’re up to 20%, perhaps a little bit more. It doesn't seem to be stopping. So it seems like that that's on an ever-increasing growth trend. And that nothing is going to stop it unless we do something about the services underneath. So that's one reason I think waste is very important.

I think another reason that actually Marcos continues to promote is that unnecessary services potentially have downstream consequences. If you get a test you don't need, typically there's a 5% roughly chance for lab tests, for example, that they're going to be outside the normal range. So if you get one test, it's unlikely that you're going to get an abnormal value just from variation. But if you do 20 tests, then the chances are pretty good that one of them will be outside the normal range, which then typically requires follow-up. Sometimes the follow-up ends up being procedures. Those procedures have complications in addition to being unnecessary expenses for somebody. They have potential complications for patients. So there is iatrogenic harm due to wasteful-- to services that shouldn't have been delivered.

MD: I think that's good. I think what I was going to add there, David, was simply put, we have three buckets of harm. So what are the consequences? Emotional harm while there’s a waiting period for results to come back. “What am I going to do?” There is a physical harm. “Am I being irradiated? Am I being poked by a procedure?” And there's going to be affordability. So we start with the financial harm and can we afford—“How many co-pays can we have? How many caregivers can we get to take care of our kids while we have to find-- we have to go across town to get an image and pay for parking and miss work, maybe.” So there's that sort of aspects of the harm.

But I think it's also pertinent to talk about the 5% of tests that become outside of range. I think it's interesting that when we come back to increasing consumer education about healthcare and know that some would argue that evidence-based medicine really started becoming more of a workflow as only as recently as maybe the early nineties, late eighties, when you had more of a guideline-driven methodology. So this respect for physicians is definitely necessary. However, understanding that there's going to be a lot of false positives is a difficult concept for most people to grasp. And, therefore, we need to change the expression of the consequences to be either in these buckets of emotional, physical, or affordable harm. And I think that's pertinent nowadays.

And I think we’re getting there with the amount of tools and the digitalization of healthcare when we can see with the swipe of an app our healthcare providers or these insurance companies do tell us that our prescription costs $5 at Walmart and $15 at CVS or $20 at the mom-and-pop that's conveniently located on your corner. But understanding-- so that’s step one is we’re starting to see some more transparency.

But understanding the bigger picture in partnership with the provider about when these things are going to be inconclusive and that we shouldn't be worried about a high rate of false positives. That's the next evolution in terms of the partnership between not only-- depending on the provider but we have to get away from the provider being the sole arbiter of your health. You need to have a stakeholder as a patient. And you need to understand with the provider or the insurance carrier what your ramifications are for affordability. A doctor can't understand what you can and can't afford. They can tell you a local price, but they don't understand your insurance and where you are in paying your deductible. So I think it's good that the debate is getting larger, I hope.

But also, the wildcard that we have not seen too much on is on the consumer side. And I think that, unfortunately, we have to figure out how to get to the consumer. And if the expression is physical harm, mental, or emotional anguish, that may not have resonated for everyone. But when the numbers get so exorbitant, the pocketbook starts to resonate with a lot more people. And I think we’re there.

JS: So given that idea of harm to the patient as well as what we were talking about before with providers not necessarily always being on board because they feel that maybe a procedure is necessary because the insurance will pay for it or for whatever other reason. It sounds like it's really difficult to try to impact healthcare waste. And so I guess I'm just wondering how can we really do this?

DM: I think your question is can we do something about it? And the answer is yeah. But first, you need to be able to identify it. Again, I think, if you take the example of paneled lab tests. At one point, you used to order the lab tests individually. And then the idea was, well, for convenience sake, plus also it was cheaper, you could order a panel of tests. And you can order different kinds of panels. Some have 10 tests. Some have 20 tests, etc. And that was all put in place for convenience and cost savings at one point.

But now we know that some of those tests in the panel are unnecessary. So they’re waste. So, I think, it's educating the providers and patients about that. And then also highlighting which one of those tests are waste, are unnecessary, and providing that information transparently to providers and, I guess, to consumers at some point. And we actually have seen examples of when that's done. And in an ideal situation when there's-- the reality is that there’s a consequence to having waste, if you’re a physician to having waste that somehow is accountable to your behavior. Or just implying that there could be a consequence to that we've seen organizations actually reduce waste. So the answer is yes, you can do something about it.

MD: Yeah, and I'll go one step in addition to that. I think we’re starting out with the low hanging fruit, so to speak, with individual services that are very high-volume, Pap smears, EKGs. That's something that David and I have been working on lately quite a bit.

But about the future and about the lack of evidence that we have right now for the more nuanced sort of procedures, the world is ripe. I think with the amount of-- with the proliferation of data and this concern about what does the future have in store for us, I think it's super bright in terms of we need more analysts. We’re going to need more-- there was a good article in the New York Times about this bio bank. And the data collection was tremendous. And the assets and whether you're talking about images and dental X-rays and blood pressure readings and your race and ethnicity and this whole culmination of data. Well, it came down to that takes a lot of money and a lot of effort. That's actually the easy bit. The hard part is how do you convey this? Do you need ethicists, ethical minds to come in and convey genetic sort of footprints? And when we get into more complicated waste I think the world is our oyster. I think there's a tremendous amount out there. I think it's going to take data. And it's going to take an army of people in the future to help us cull together a combination of big data and machine learning combined with scientists, regression against that, and understand that the data alone is not the answer. It's got to be combined with the scientist.

And so, in summary, I think in the short-term, we’re fighting the good fight and laying the foundation for changing behavior about simple care that is of low value. And I think that's the step in the right direction to the more complicated world where there’s less procedures, they’re more nuanced, and there's going to be a targeted population. And how do we make those efficient?

And the final note I’ll say, there was a good article yesterday in the Boston Globe about the proliferation of knee and hip replacements. It's astounding how many knees and hips are going on in the country right now. Ten-fold increase since 2012. And the cool thing I saw in the article, you know, I'm going to question are the right people getting those? Are too many people getting them? Are they high-value? But stepping back from that question, the cool thing was that the manufacturers of the replacements are actually figuring out how to slightly customize-- think of it as kind of a 3D printer-- they're customizing these joint replacements to have maximum longevity. So they’re already a step ahead of us because they’re incentivized to get their joint replacements out there. So they’re already figuring out the nuance of the populations to maximize the amount of people getting the joint replacement. So now we need to also step back and use those techniques and make sure the right people are getting them. And we don't have too many people getting them because the consequences are big and drastic in terms of it’s not just the operation. It's do you have a change in your diet, a change in your exercise pattern, a change in your lifestyle that’s going to make that joint replacement a successful outcome.

DM: I just wanted to add one thing to my previous comments about can you do anything about waste? I think most physicians-- I think once they understand that a particular decision that they may have been taught to do in their residency or somewhere along the line that it is not appropriate from a value perspective, it truly is waste, I think the majority of them, actually, will change their practice patterns as long as they know that they're doing this. If you ask them do you do this? The answer often is no or once in a while. But, I think, what they don't know is they don't see how frequent it actually is. So I do think it is very important that we create ways to identify, measure, and benchmark the amount of waste going on in a particular physician’s practice.

MD: Yeah, I'd say my favorite fun fact on that is the writing of prescription drugs by providers. They don't realize that there's actually studies that show the amount of prescription drugs written after lunch when a provider starts to get tired and later in the week increases. So you need to remind them. They are benevolent. They just need aids. And we need to figure out workflow to integrate so that the physician understands that, “Yeah, I might have done that once or twice.” But then you show them a report, “Oops, I did it 10 times. And, oops, it was actually when I'm rushing to get to see my child at school at five in the afternoon at a soccer game,” or something like that. They’re humans. So we just need these aids.

And I think right now, the Obamacare, with that great incentive to get digitization out to all practices even in rural areas, that was step one. Now, we've got to figure out how to make that efficient. The providers will make the right choice, but they're overwhelmed with information. And now we need to figure out how to make that efficient in the delivery. And then the knock-on effect will be these efficiency gains with low value care being rooted out. But we have to tell them where to start. And they have to be incentivized, too, the other thing. And a good road ahead.

JS: I want to get back to this idea of clinical nuance and how difficult it might be to actually identify low value care. You guys have both kind of touched on that a little bit. But can you expand more on how difficult it is to identify and figure out where a low value care is?

DM: Well, I actually don't think it's that difficult. I think there's two perspectives to responding to that question. The first perspective is can you recognize it as a practitioner? So, again, there are organizations, for example, Choosing Wisely that have identified services that are wasteful in particular clinical situations. That is actually pretty easy for a practicing physician, if they’re aware of that, to recognize when they’re seeing a patient. You know, you see a patient. He or she is 40-years-old. They have a particular clinical history which you either can inquire about from them or you actually have that in your electronic medical record or paper medical record. And so you actually can recognize that and understand its waste. And that's pretty easy.

From my population base or systemic approach trying to get-- identify waste from various administrative data sources is harder. And you can't do it for all services that have been identified as wasteful. But you can do it for a lot. And I’m going to let Marcos chime in here because he actually is an expert in doing that.

MD: You know, we learned from and glean upon the thought leadership from the physician societies that dictate, again, this low hanging fruit of a test which, for you in your circumstances, is high value and me in my circumstances is needless and low value and wasteful. So I think the roadmap is there. And I would agree, it’s pretty simple. I would go one step further and say it's an incentive problem. And I think that a good way Milliman plays a role is to accentuate that the incentives need to be aligned for both the insurance company and the provider. And the third leg of the stool which would be the consumer, the purchaser. So I think clinically we agree and we’re getting thought leadership from the physician societies themselves.

I think the next step is really to talk about what are the right incentives based on the gamut of priorities everyone has? And how do you make that a higher priority for your cause? Obviously, we all want to make our cause the highest priority. But what is low value competing with? And in certain circumstances, if we’re talking about an EKG or, again, an additional test on a panel for labs, it's still one blood draw, it's 10 more tests. So how do you measure that? Is it the pathologist’s time? Is it the patient's time? They're going to get the draw anyway. And is the insurance company paying for it? So that's some of the rub is thinking about the next generation of what is the incentive to get-- I think we’re fine with identifying the clinical nuance of when it’s low value. It's now getting the incentives and the information to act upon it. So I would agree with David on that.

JS: Can you expand a little bit more on the idea of incentives? Are we asking health insurance companies to provide incentives to providers? What does that look like?

MD: I'll start with the traditional actuarial approach, which is something as simple as cost sharing. So if we increase the burden-- you know, the premise has been in the last, particularly, five years the penetration of high deductible health plans far exceeds 20%. So the tool that's been used, the blunt instrument that we have in this country, has been to push the burden of expense to the purchaser and let them figure it out and let them break. And what we’ve seen is that has broken. They’ve answered. They're not getting services. So we do need to study a little bit more of our low value services-- can they be disincentivized. I think right now the hypothesis is no. All services are being treated equally because the consumer doesn't know.

So, again, I think in summary, I think the blunt instrument now is to overburden the purchaser. The purchaser is unarmed. The purchaser is not really personally and population-wise doing things that show that they care. So we need to do something different. And the different is what the rub is.

DM: I have a little different example, which is one of the big categories of waste is providing antibiotic prescriptions to people with viral infections. It happens every day. You find providers who say they are never going to do this, but they get badgered by every patient who comes in with a cold for an antibiotic prescription because the patient believes this is the only way they're going to get better. Or the patient says, “Well, I took time off to come in today, okay, you say I have a viral infection, but I might get a bacterial infection in two days and I don't want to take off work.” So there's tremendous pressure on the prescribing professional to just give the patient antibiotic. They often will justify it by saying, “Okay, if they don't get it from me, they’ll go to an urgent care center or a doc-in-a-box somewhere else or they’ll now do telemedicine service to give them in antibiotic.” I think in that case, the incentive needs to be that we’re letting the physician know we’re measuring you on this. And, as I said before, there is potentially a consequence. It's a dis-quality. It’s bad. It's not good medicine. It might be great customer service, but it's bad medicine. And we’re going to measure that. And there are a number of different methodologies that can be then brought into play. If it's an at-risk physician group, they can sort of say, “Okay, your bonus, etc., or your profit sharing is going to be partially determined by this.” If it's a salaried physician group, their bonus at the end of the year can be partially determined by this.

So I think there's lots of things that can be brought into play once we measure it. I think probably the most important one, quite frankly, is the physician is going to look at that and they're going to say, “I mean, I do this more than anybody else?” And they know it's not the right thing to do. So they actually will often self-police themselves even without those other-- I guess they're not really incentives or disincentives to do that. But I think you need those.

MD: Yeah, and I would add, too, from a Milliman perspective, that we’re seeing this begin. We’re seeing a demand from the client base for all of Milliman about tiered networks and doing more physician profiling and having more capabilities to identify physicians from a quality as well as a price perspective as opposed to the previous mantra which just is price. So I think we’re starting to see that in a big way and it’s just the beginning.

JS: Can you both talk some more about different examples of waste?

DM: Well, we talked about antibiotics for viral respiratory infections. I think that’s one probably all of us have run into at some point. And so I think that's a very, very common one. I think doing tests on people who are low risk for disease is another one. And there's a bunch of examples on that. And, in fact, this represents a real change in the industry, which hasn't really gone as far as we'd like. So, for example, males over the age of 40, it used to be, “Okay, we’re going to run EKG on you. We might even have you do a stress test just to make sure there's not something going on that we don't see. You're perfectly healthy.” We know now that those are waste. That there’s virtually no value to those. However, if you look at what we call the executive medicine industry, which is our organizations that basically provide screening services to executives of various corporations, they still do all of these kinds of things and they sell it to those corporations as added value when the truth is there still is no value to that. But, I think, those are some good examples that I can think of off the top of my head. Marcos, I'm sure, will add to the list.

MD: Well, I think, my favorite one is-- and I use this quite often when we talk, Dave, it's we had this fantastic opportunity, the UCLA researchers worked with a Medicaid population at the L.A. County hospital. There you have the largest homeless and Medicaid population concentrated in an urban area. A really tough population to engage with. And here was an example where the team with data and clinicians solved an easy wasteful problem. We had a large population, so population health, the numbers were big, so it made it easy for an approach. So they chose cataract surgery. So they had a tremendous amount of the Medicaid population who needed to get a cataract surgery. And they were able to stratify them into a low severe grade of Medicaid folks who everyone was being subjected to preoperative laboratory screens.

But now we can use data to stratify the Medicaid folks into a tier of low severity ones that we could also make a decision will we not give them laboratory screens. So the laboratory screens, as David said earlier, about 5% of the time, we know are going to give results that are outside of range. So if everyone who needed a cataract surgery got these, then a significant portion of those folks were going to have to be delayed and have subsequent screens, subsequent consultations after the preoperative false positive. And, therefore, on average, these people were waiting almost three-quarters of a year to have their eyes corrected.

Now, what the clinician leadership did at UCLA is they said what if we take the low severity people and omit the laboratory screens, what happens? And what happened is a six-month diminishment on the time to surgery on average. That's six months that people could see. They turned out. They did a back of the envelope calculation and said the savings was $1200.

Now, a firm like Milliman, we can go in there and we can sharpen the pencil and say what the numbers are. They weren't able to really get to that $1200 unit of value quite readily. We have a lot of room there. But you have this predicament where you have traditionally a population which people perceive to be difficult to manage and deal with, Medicaid. You're in an urban center, L.A. County, who knows how inundated they are and overwhelmed they are with services. And yet, they were very poignantly going into a subpopulation, a classification cataract surgery. And it turned out to be this amazing win-win. Six months, human beings got six months increased-- improved vision. That's tremendous. And then also the savings not only is $1200, was the savings of the procedures, but you had the savings of the practitioners and the mitigation of having to have people wait in waiting rooms and get a barrage, a battery of testing. So that's my favorite waste story right now.

And we hope our data analytics and the actuarial capabilities of Milliman increase incentives and enlighten more poignant scenarios like that, and that typifies a difficult population that is definable, a nuance predicament like cataract surgery and a mitigation of ticking the box to mitigate affordability, the waste, the financial harm, emotional harm, because I'm sure some of those patients-- well, first of all, they couldn't see. They got vision six months earlier. And then physical harm. Maybe some of them got other additional tests. Maybe not a lot of physical harm, but maybe they got other tests that were inconvenient to being poked and prodded on that way to the colossal win-win. I think there's some other great stories out there like that. But that's what we’re gravitating to is our baseline. And we hope to jump off of that.

DM: Right. And just to make sure that it's clear what needs to be clarified in Marcos’ story is that doing preoperative screening and low risk individuals has been identified as waste by Choosing Wisely. So that's what UCLA was building on.

MD: Yeah.

JS: I think we're just about wrapping up here. But do you guys have any final thoughts on this topic, anything you want to share, maybe ideas about hope for the future?

DM: Well, I think, quite frankly I've been surprised that the whole issue of waste in healthcare has actually been fruitful-- I mean positively addressed.

And you asked me a question, can you really do anything about this? And if you had asked me that question maybe four or five years ago, I would have answered maybe. But what's interesting now is that we’re actually seeing all of these examples. We know of a health insurance company that essentially said, “All right, we’re going to identify waste. And we’re going to publicize it to providers but also to consumers. We're going to go direct to our members.” And they have billboards and educational things on, “This particular service is waste. Here's what you as a consumer need to know about it.” And I thought that was cool. Because I didn't expect they’d ever do that.

And we have several other organizations we work with who have, actually, bitten this topic off as something they want to work on and have actually begun to achieve to see, anyway, and to report to us reductions in some of these services that have been identified as waste. So that I think is a cool, maybe, positive way to end our little discussion.

MD: Yeah. The only thing I would add to that as very positive as well is now more than ever we have the ability to put the waste in context to overall cost of care. And I think that's an advantage we have. And being in Milliman, having that purview of the total cost and then looking at what the opportunity is of addressing waste, I think that helps folks make a line and create incentive packages to do something about it. And I think that's a very-- we're just at the beginning of creating these value packages. And it could be typified by new insurance benefit design. It could be typified by, as we’re seeing, the first easy bit is adjusting the contracts between payers and providers. Those are roles where Milliman is going to be at the forefront on.

And I think we’re just at the beginning of being innovative about creating, weaving nuance and value into the conversation. And I'm looking forward to it. It should be pretty good.

DH: You've been listening to Critical Point presented by Milliman. To listen to our other podcasts, please visit us at See you next time.