Low-cost, low-value, high-volume health services contribute to 65% of unnecessary medical costs – here’s what health plans can do about it.

Each year, the U.S. spends nearly $1 trillion on unnecessary medical expenses. [1] A study published by the Harvard Business Review estimated that roughly 40% of unnecessary medical spending can be avoided by addressing the clinical waste, administrative complexity, excessive prices, fraud and abuse experienced in the system. Professional guidelines, personal judgment and health plan design make these types of waste difficult to address.

Is it possible to tackle low hanging fruit in the waste equation to chip away at the egregious cost for unnecessary medical care?


Waste in U.S. Healthcare
Source: Harvard Business Review

Focus on low-value, low-cost services to start

A recent study published by Health Affairs highlights how health plans can reduce unnecessary costs by curbing low-value services. [2] Looking at the Virginia All Payer claims database for 2014, roughly $586M in unnecessary medical costs were attributed to low-value services across two categories:

  1. Low-value, low-cost services typically valued at or under $538
  2. Low-value, high-cost services typically valued over $538

Surprisingly, low-value, low-cost services made up 65% of the total unnecessary medical costs in the data set examined. [3]

Examples of low-value, low-cost services include:

  • Baseline lab tests for low-risk patients having low-risk surgery: Studies have shown that a good history, physical exam, followed by a review of a patient’s chart are sufficient for low-risk patients who are headed to get a low-risk surgery. [3, 4, 5]
  • Stress cardiac and other cardiac imaging in low-risk, asymptomatic patients: An article in the Cleveland Clinic Journal of Medicine indicated that low-risk patients that undergo unnecessary cardiac stress tests may be exposed to more risk through additional follow-up testing. [3, 4, 6]
  • Annual EKGs or other cardiac screening for low-risk asymptomatic patients: The American Academy of Family Physicians cited risks of false positives that often lead to unnecessary invasive procedures, overtreatment, and misdiagnosis for annual EKGs for low-risk patients. [3, 4, 7]

Why reducing low-cost, low-value services is difficult

Some of the challenges stem from the lack of health education and awareness that directly impacts people’s decision making abilities. Specifically, not many consumers make research-based decisions when it comes to their health. In fact, many consumers rely on their doctor’s recommendation to make key health decisions according to a McKinsey survey. [8] Therefore, if providers recommend a low-cost, low value service to a patient, they are more likely to comply – contributing to the $1 trillion in unnecessary medical expenses.

How to reduce costs

The first step focuses on targeting. Who in the plan membership is anticipated to get a low-cost, low-value service? Health plans can intervene by providing members with educational materials to help them understand the costs and benefits of getting these services so they can make informed decisions.

NextHealth enables just the type of targeting that helps health plans identify the right members to engage. Using claims and provider data, NextHealth identifies members who are predicted to get a low-cost, low-value service and intervene with a nudge that incorporates education and behavioral science theories so members make better health choices. The process is simple and can be a powerful way to tackle the low hanging fruit when it comes to reducing the $1 trillion in unnecessary medical expenses.

Contributed by Thomas Tran, Engagement Manager, NextHealth Technologies


[1] How the U.S. Can Reduce Waste in Health Care Spending by $1 Trillion

[2] Low-Cost, High-Volume Health Services Contribute the Most to Unnecessary Health Spending

[3] Study: Unnecessary health spending fueled by low-cost, low-value services

[4] Low-Cost, Low-Value Healthcare Services Ripe for Reaping

[5] Perioperative Testing

[6] Is cardiac stress testing appropriate in asymptomatic adults at low risk?

[7] Annual EKGs for Low-Risk Patients

[8] Debunking common myths about healthcare consumerism

Targeting impactable members is critical to changing behavior and reducing medical costs. See how easy it can be.