A somewhat surprising report was released by Thomson Reuters regarding the wasteful spending practices within the American healthcare system. Not that system inefficiencies, unnecessary testing and good old-fashioned fraud should come as any surprise to those who follow this stuff, but it was the degree that caught my eye.

Their conclusion is that big dollars fly out the window to the tune of an estimated $700 billion annually.  That’s about 1/3 of our nations’ annual healthcare tab!

Here’s what they found:

Fraud, which finds a happy home in many Medicare and Medicaid billing fiascoes, accounts for between $125 billion to $175 billion each year.

Administrative Inefficiency accounts for between $100 billion - $150 billion.  This is the endless stream of paperwork that an EMR is suppose to help.

Provider Errors create mistakes that chalk up another $75 billion to $100 billion.

Unnecessary Care is my favorite and one that made me look twice.  This is the one that providers will over-prescribe or over-test in order to limit their malpractice risk. Contrary to what the tort lawyers say, this study pegged this expense at a whopping $250 billion to $325 billion annually! This is by far the highest estimate attributed to this practice that I’ve seen.

Preventable Conditions is the second category that caught my attention. Long reported as representing anywhere from 25 – 50% of total medical spending, this study allocated a much more modest $25 billion to $50 billion. Let’s hear from the Wellness industry on this one.

Lack of Care Coordination was identified as the last major category. This is characterized by inefficient communications between providers that result in duplicating tests and less than “best practices” treatment. The price tag: another $25 billion to $50 billion per year.