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A groundbreaking research study released Monday by Humana reveals that $1 out of every $4 spent on health care in the U.S. annually is being wasted. It's a situation that needs to be addressed by the industry at a time when consumers are grappling with spiraling medical costs. The cost of health care should never be top of mind for patients — not when they are facing emergencies, nor when they are living with multiple chronic conditions. For this ambition to become a reality, we must evolve the health-care system to more efficiently deliver personalized care for our patients.

Yet rising health-care costs are a reality and cause stress for many people. If we are to successfully confront the issues of cost and efficiency in care, we first need to fully understand the systemic problem of wasteful spending. Our researchers at Humana recently completed this multiyear study, published this month in the Journal of the American Medical Association. The study puts a spotlight on the nearly 25% of our country's annual total health-care spending that can be deemed as waste, or between $760 billion and $935 billion each year.

Rising health-care costs are a reality and cause stress for many people. If we are to successfully confront the issues of cost and efficiency in care, we first need to fully understand the systemic problem of wasteful spending.

Dr. William Shrank, Humana's chief medical and corporate affairs officer, led the study identifying the extend of waste in the system. But he also found a silver lining in the results. Dr. Shrank said this study shows that "in the national debate about health reform, we don't need to start over. We can build on the strengths of today's system … while also producing the necessary savings to expand coverage to all Americans." So why is this all happening? Our researchers examined and ranked the contributing factors. Failures in care delivery, care coordination, overtreatment/low-value care and pricing failure topped the list. We identified administrative complexity as the greatest source of waste. Administrative complexity causes $265 billion to be misspent annually. We all want our doctors carefully credentialed and our information systems to work seamlessly. Processing medical claims and payments are also a necessary cost of operating and require some administrative effort and expense. But the cost of complexity can become waste when clinicians and health plans work separately, despite our common goals — not the least of which is the desire to allow patients to focus on care before cost — or, in broader terms, value. We are aligned on the importance of care that provides a patient with real value, but the traditional model has not incentivized us to help each other.

The new value-care model

That is why the value-based care model is making headway when it comes to reducing health-care costs and improving value. Value-based care recognizes physicians' dedication to their patients' health by reimbursing the provider when their high-quality service leads to better health outcomes. It is not about the amount of services they provide or the number of patients they see; it is about using an integrated approach to improve health outcomes. This integrated approach — which includes behavioral health, pharmacy, social determinants of health, home health and primary care — becomes the common framework in which caregivers and health plans can meet.