AI-First Healthcare

Chapter 5. An Uncomfortable Truth

Healthcare waste is frequently defined as healthcare that does not add quality or improve patients’ outcomes. The latest data from the Centers for Medicare & Medicaid Services (CMS) indicates that healthcare spend went up by 4.6% in 2019, reaching $3.6 trillion. As a share of the nation’s gross domestic product (GDP), health spend accounted for nearly 18% of overall spend. The healthcare spend distribution was 33% for hospital care services, 20% for clinician services, and 9% for retail prescription drug costs, with the rest accounted for by several subcategories, including dental care, home healthcare, home medical supplies, and nursing home care.

A 2019 article published in the Journal of the American Medical Association (JAMA) by William Shrank, Teresa L. Rogstad, and Natasha Parekh estimates that 25% of our healthcare spend results in healthcare waste.¹ That amounts to anywhere from $760 billion to $935 billion in waste. The article breaks down healthcare cost waste into six main areas: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion. This amount of waste is high, but it can be addressed by using AI to improve operational efficiency and facilitate clinical care. ...