Healthcare systems: Tackling waste to boost resources

Head, Health Division, OECD Directorate for Employment, Labour and Social Affairs

Is there such a thing as a right amount of health spending? In an ideal world, this would likely mean spending that achieves effective healthcare services, with good outcomes for patients, the right number of professionals with the right skills, and delivers good value for tax payers with little, if any, wastage. Finding that balance is a difficult challenge. 

Avoiding wasteful healthcare spending has been a public policy goal for decades, but since the global financial crisis started in 2008, the need has gained new urgency. The United States, for instance, spends 16.9% of its gross domestic product on health. Nearly a third could be wasted, according to a 2012 Institute of Medicine study. US healthcare spending as a share of the economy is almost double that of OECD spending of 8.9% – and yet, the country’s citizens can hardly claim to be twice as healthy as people in other developed countries.

But the United States is not alone: alarmingly, as much as a fifth of health expenditure makes little or no contribution to good health outcomes. All OECD countries need to free up resources so that healthcare systems can perform better. Far more could be done to sort out what is wasteful from what is not, and possibly even achieve more with less.

Consider clinical care. Wasteful clinical care occurs in hospitals when people seek emergency care even when their condition is not urgent.

Hospital inpatient care comprises an average of 28% of total health spending in OECD countries. Hospital care could be made more efficient if it were devoted solely to essential or acute care. Pressure can be taken off hospital services by focusing resources on alternatives like primary care and community care facilities. Norway has intermediate care clinics that are open out of hours, and the United Kingdom is experimenting with GPs who consult seven days a week.

Umbrella systems of caregivers can help relieve pressure on hospitals, too. In France the system called PAERPA (Personnes Agées En Risque de Perte d'Autonomie) coordinates health and social care services for the elderly, for instance. Hospital At Home is another resource currently being expanded.

Even when a hospital stay is unavoidable, effectiveness can be improved. Same-day surgery for procedures such as cataracts and arthroscopic meniscectomy has grown over time, yet same-day surgery rates for cataract remain relatively low in Poland, Hungary and Turkey.

So-called adverse events can lead to prolonged inpatient stay. They affect between 4% and 17% of admissions, with around 30‑70% judged preventable. The use of checklists, a strategy borrowed from the aviation industry, is an effective way to reduce error. A 2002 study showed that checklists reduced the rate of error from 30.9% to 4.4%. The digitalisation of health records and computerised physician order entries also reduce errors. Systems and protocols need to be upgraded to avoid mistakes.

Patient stays can be unnecessarily prolonged when they acquire infections. About 23,000 and 25,000 deaths per year are directly attributable to anti-microbial resistance (AMR) in the US and Europe respectively with a cost of about US$20 billion per year. Inappropriate use represents about 50% of all antimicrobial consumption by humans, but may be as high as 90% in general practice. Comprehensive strategies to monitor and encourage rational use of antimicrobials include interventions targeted at both the general public and clinicians, among others.

Pharmaceuticals constitute a major source of operational wastefulness. In OECD countries, pharmaceutical spending comprises between 6.7 and 30.2% of national healthcare budgets. Two irrefutable ways to tackle waste in pharmaceutical spending is through bulk purchasing and replacing originator with cheaper generic drugs.

Swapping generic for originator drugs holds tantalising price-saving possibilities, but requires changes in behaviour. Physicians can be nudged to prescribe cheaper generics with guidelines and incentives. In Greece, public hospitals are required to reach a 50% share of generics in total volume of administered pharmaceuticals, and in Japan pharmacists receive bonuses. Meanwhile, patients can be persuaded to use generics instead of originator drugs if the reimbursement for the former is higher or if, as in Greece and Ireland, people pay the difference in price.

Shifting from expensive biologic medicines used in highly-targeted therapies for cancer and rheumatoid arthritis, for example, to their cheaper biosimilar alternatives could yield even larger results: replacing eight key biologics with biosimilars in the US and five European countries could save more than €50 billion (US$54.5 billion) by the end of 2020, according to estimates from the IMS Institute for Healthcare.

What about governance?

Spending on administration comprises a rather modest share of overall health expenditure–only around 3% on average in OECD countries in 2014–but it is often perceived as a soft target when it comes to cutting clinical waste. There could be areas to look at though, for example reduction in unnecessary administrative systems or the growing use of paperless e-prescription.

Fighting fraud and corruption, which are all too prevalent in OECD healthcare systems, would also generate savings. According to one survey, around 35% of citizens in OECD European Union (EU) countries believe that “giving and taking of bribes and the abuse of power for personal gain is widespread” in health. Meanwhile, loss to fraud and error is estimated in a 2015 report at about 6% of related health expenditure on average. Several OECD countries have recouped millions if not billions thanks to fraud detection in their systems. Policymakers could take a stronger lead in reducing waste from these and other integrity violations, and promoting better practices in healthcare.

In short, the rule of thumb for policymakers is clear: encourage healthcare systems to stop doing the things that do not bring value, and swap for equivalent but less pricy alternatives. Targeted action with a surgeon’s scalpel, rather than wielding an axe, would generate large savings and boost healthcare performance, too.

Visit http://www.oecd.org/health/ministerial

References

OECD (2017), Releasing Health Care System Resources: Tackling Ineffective Spending and Waste, OECD Publishing, Paris

Evans, Robert G. (2013), “Waste, Economists and American Healthcare”,  in Healthcare Policy, November, US National Institutes of Health's National Library of Medicine (NIH/NLM) , Longwoods Publishing, available at PubMed Central, search code PMC3999538 at https://www.ncbi.nlm.nih.gov/pubmed/

IMS Institute for Healthcare Informatics (2016), Delivering on the Potential of Biosimilar Medicines: The Role of Functioning Competitive Markets

Institute of Medicine (2012), Best Care at Lower Cost: The Path to Continuously Learning Health Care in America, report brief available at  https://www.nationalacademies.org/

©OECD Observer No 309 Q1 2017




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly


Online edition
Previous editions

Don't miss

  • How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.
  • Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.
  • OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.
  • OECD Secretary-General Angel Gurría discusses the uncertainty in politics around the world, lack of proper skills for future jobs, global growth and US-Mexico relations.
  • Green Talks on 3D printing: 3D printing may be growing rapidly and innovations abound, but what does this mean for the environment? Click on the picture to join Shardul Agrawala of the OECD Environment Directorate on 27 February at 13:00 CET to discuss the potential benefits and drawbacks of widespread 3D printing.
  • How should pension systems account for gender differences and deliver equitable pensions for women and men? Do differences in financial literacy between men and women impact their long-term well-being? These are some of the questions to be debated at an OECD-hosted conference taking place on International Women’s Day, 8 March 2017.
  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • OECD Environment Director Simon Upton presented a talk at Imperial College London on 21 April 2016. With the world awash in surplus oil and prices languishing around US$40 per barrel, how can governments step up efforts to transform the world’s energy systems in line with the Paris Agreement?
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2017