A guest column by the American Society of Anesthesiologists, exclusive to KevinMD.com.
The U.S. spends the largest amount of money on health care in the world – around $4.3 trillion annually. However, an estimated 20% to 30% of this is wasted, with no benefit reaching the populace. Culprits contributing to this waste include administrative and duplicative paperwork, and overpriced pharmaceuticals and medical devices. To put it in perspective, the waste is equivalent to the gross domestic product of Norway and Finland combined! It’s more than the U.S. annual budget for Veteran medical care and even the U.S. government Medicare program!
While we rank #1 in health care expenditure (HCE), we are not even in the top 10 in the Health Care Satisfaction Index among nations, with Norway reigning at the top. Our national per capita HCE is $12,914, more than twice that of the average next ten developed countries on the list. Our health care waste, by many estimates, has reached a staggering $930 billion. A solution would be to adopt the dynamics of a circular economy, wherein by increasing recycling and reprocessing, net waste is reduced, and more products and services are reused or repurposed. Another would be to even just cut down on administrative costs and we could save $200 billion, which would ensure an additional 20 million uninsured Americans.
Why is our spending so exorbitant?
A common defense is that the U.S. performs more procedures annually than other developed countries. However, data has shown that procedures, disease rates, the physician and nursing workforce, and hospital beds per 100,000 of the population are not drastically different between the developed countries. What drives the bill up is the cost of labor and goods, especially drugs and administrative costs. Administrative costs totaling $266 billion include time dedicated to billing and reporting to insurers and public programs. According to Donald Berwick, M.D., MPP, FRCP, the former Administrator of the Centers for Medicare and Medicaid Services (CMS) under President Barack Obama and a single-payer advocate, now at the Institute for Healthcare Improvement, moving to a single-payer system would possibly eliminate administrative issues regarding the navigation of various private and public payer programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. Hence, the lack of political will to change the milieu results in persistent administrative wastes and out-of-control prices.
Additionally, the COVID-19 pandemic disrupted global supply chains. McKinsey & Company, a global management consulting firm, conducted a survey and analysis of how global supply chains have been affected by COVID-19. They stated that the health care industry had been largely using a Just in Time model (JIT), wherein supplies were ordered as per demand. While the JIT model was responsible for the last-minute deliveries of essential health care products pre-COVID-19, it was not a sustainable model during the pandemic, when the demand for certain products grew and others declined. Lack of supply chain resilience was exposed, and this directly led to shortages of equipment and deficiencies in health care delivery. Supply chains now account for 25% of pharmaceutical costs and 40% of medical device costs.
Other important contributors to health care waste include variable pricing of pharmaceuticals and resultant billing deficits. Drugs are much more expensive in the U.S. compared to other countries. Some of the main reasons include the supply chain issues previously noted, shortages, expensive alternate treatments, and last-minute pricing. Approximately 260 drugs that have had national shortages over the past year include essential medications such as albuterol, bupivacaine, hydrocortisone, and dopamine. Umar Kamal, MD, Taysir Awad, MD, and Beenish Khurshid, BS, noted in an article that nationally, hospitals incurred an additional $229.7 million per year in costs between 2011 and 2013 because of more expensive generic replacements for drugs in short supply. This figure does not include indirect costs of off-contract purchases, therapeutic alternatives, or additional labor requirements. This danger to public health and safety is particularly pertinent for anesthesiologists, because the growing list of critical, lifesaving medications in short supply are disproportionate in this specialty. Eighty percent of generic medications in the U.S. are produced outside of the country by three major pharmaceutical companies as far off as Israel and India. Moreover, 90% of the hospitals in the country are supplied with all of their pharmaceutical needs by just four group purchasing organizations. The largest one in Dallas supplies 33% of all hospital systems in the country. When there is any issue in production, procurement, or transportation from these faraway countries, supply chain nightmares are created in our country for generic medications, as they are often in shortage.
Why not produce generic medications in the U.S.?
The profit margin in these generic, but much-needed drugs, is so low that big pharma does not want to venture there. They prefer to produce branded niche drugs that are more expensive, patented, and profitable. Regulations to ensure safety can also serve as a roadblock to a quick recovery from a national shortage. Currently, the production of drugs involves so many stifling regulations and approval from so many regulatory authorities in multiple countries that the prospect of a near-term solution seems bleak. Hence, pharmaceuticals continue to cost us and our health care system a pretty penny every day.
The costly impacts of physical and environmental waste
Health care waste is a combination of financial, physical, and environmental waste. While the bigger battle is being waged against financial waste, health care providers all wage their own personal battle against physical and environmental waste in the health care sector on a smaller level. The health care industry is responsible for 6% of all global greenhouse gas (GHG) emissions and air pollutants. No one is more familiar with this than the operating room (OR) personnel with multiple bags filled with plastic and bio-waste after a single surgery. Anesthesiologists can influence this data with their choices of anesthetics. Waste anesthetic gases contribute 0.01% to 0.1% of total GHG and 3% of national health care GHG. The fact that 1 hour of desflurane is equivalent to the automobile emissions of 200-400 miles of driving, drives the point home.
What can be done to attenuate the damage and possibly reverse it?
William H. Shrank et al. in their analysis of health care waste point out that minor efficiency gains could free up billions of dollars for investment elsewhere. Before the pandemic, health care risk management, digitization, supply chain planning, and technology were fragmented and decades behind other fields with similar fast-moving consumer goods, such as aerospace and the auto industry. However, health care has managed to swing the pendulum and in the last two years, the industry has shown the most improvement in supply chain resilience, regionalization of production networks and diversification. At the hospital system level, necessary innovation includes dynamic, real-time pricing marketplaces with thousands of suppliers and allied products under one roof. Another is better holistic procurement platforms, such as EVOLVE 2P®, with specific modules for spend analysis, sourcing, and contract lifecycle management that allow for seamless information flow across different sections of the supply chain, offering a specific advantage over standalone systems.
To help reduce the impacts of physical and environmental waste at the OR level, the anesthetic plan should avoid desflurane and nitrous oxide. Total intravenous anesthesia should be encouraged. If gas is to be used, scavenging and evacuation and gas capture systems to catch and recycle volatile anesthetics are vital. Nitrous oxide is used outside the OR in dentistry and in the labor room, and nitrous oxide pipelines lose extensive amounts of gas to the atmosphere. Therefore, minimizing its usage is vital.
In the perioperative setting, sterilizers and autoclaves also contribute to GHG. Optimally choosing instruments, avoiding opening unnecessary disposables, reusing equipment, and recycling and reprocessing cables have all been shown to decrease our carbon footprint without affecting quality of care. In 2021, the Centers for Disease Control and Prevention (CDC) issued a statement on climate effects on health, stating that GHG is contributing to a decline in mental and physical health in the U.S.
Unless all of these measures are undertaken in every single hospital system in our country and every health care provider recognizes and attempts to remedy the situation, we are creating our own downward spiral into irremediable decline.
Lalitha Sundararaman is an anesthesiologist.