Eliminating waste in US health care: evaluating accountable care organizations as a model for quality sustainable care

Abstract

In 2011, the United States spent $2.7 trillion in health care expenditures, accounting for 17.9 percent of the Gross Domestic Product (GDP). Health care spending increased by 3.9 percent in 2011 and is expected to surpass 20 percent of GDP by 2020. An investigation of national trends in health spending conducted by the Institute of Medicine (IOM) estimates that approximately 30 percent of US health expenditures—that is, about $750 billion—is wasteful spending. Analysis of spending trends suggests waste in health care falls into one of six categories: (1) failures in care delivery; (2) failures in care coordination; (3) overtreatment; (4) administrative complexity; (5) pricing failures; (6) and fraud and abuse. A sustainable level of health spending would be one that grows at the same rate as the GDP; this would require cutting health care expenditures by an estimated $2.2 trillion by 2020. Distributing these cuts across the spectrum of wasteful spending by specifically targeting cost-containment efforts toward those areas of waste, it is possible—albeit challenging—to create a more solvent health care system. The Patient Protection and Affordable Care Act of 2010 (ACA), landmark legislation of the Obama administration, introduced extensive policy changes and addressed the unsustainable trajectory of Medicare with the debut of the Accountable Care Organization (ACO). The novel ACO design aims to bring hospitals and physician groups into partnerships with the common goal of providing quality, affordable care to a defined population of patients with the introduction of a Shared Savings Program and a triple aim of: (1) improving population health; (2) providing higher quality-care experiences; and (3) moderating per-capita health care cost increases. The ACO has the potential to address each of the six areas of waste specified by the Institute of Medicine, bringing health care expenditures down to sustainable levels, while also increasing the quality of care and the efficiency of US health care overall. The ACO model is promising, but poses its own challenges as a largely untested health system structure, and will require extensive efforts to refine and perfect the model in order to be a feasible answer to the US health care crisis.