Administrative inefficiencies, medical errors, unnecessary treatments and fraud contribute to between $600 and $850 billion of wasteful spending within the U.S. healthcare system annually according to a new report by Thomson Reuters. The report, based on a review of published research and analyses of proprietary data, identifies the most significant drivers of wasteful spending.

 

“The bad news is that an estimated $700 billion is wasted annually. That's one-third of the nation's healthcare bill,” says Robert Kelley, vice president of healthcare analytics at Thomson Reuters and author of the report. “The good news is that by attacking waste, healthcare costs can be reduced without adversely affecting the quality of care or access to care.”

 

Unnecessary care accounted for 40 percent of the waste in the system. This includes unwarranted treatment, such as the over-use of antibiotics and the use of diagnostic lab tests to protect against malpractice exposure. In all, this accounts for between $250 billion to $325 billion in annual healthcare spending.

 

Kelley attributes 19 percent of waste – between $125 billion to $175 billion each year – to fraud, which ranges from fraudulent Medicare claims to kickbacks for referrals for unnecessary services. Another 17 percent he attributes to administrative inefficiency, such as redundant paperwork, which contributes $100 billion to $150 billion in waste annually. And healthcare provider errors accounts for a further 12 percent in unnecessary spending each year -  representing between $75 billion and $100 billion.

 

Rounding out the litany of wasteful spending are preventable conditions and lack of care coordination – each accounting for about 6 percent or between $25 billion and $50 billion a year.