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Medical Waste: Trillion Dollar Dumpster Fire


"In this world there is only one thing of value, to live out your life in truth and justice, tolerant of those who are neither true or just."

                     - Meditations by Marcus Aurelius, translated by Martin Hammond, Penguin Classics 2014, p. 18


Here at we can’t afford to pay for a subscription to JAMA, so we rely on others who can, and who quote extensively from that publication and can navigate their expensive paywall.

Recently, we came across an article by Tyler Durden over at (you should support them if you already don’t), entitled “The US Healthcare system is Hemorrhaging Close to To $1 Trillion A Year” which referenced a JAMA article[1] on this subject.

To our regular readers, this headline comes as no surprise. And for those of us who work in medicine, $1 Trillion might appear as a gross underestimation of the amount of waste in our dysfunctional healthcare system.

What is the source of all of this incredible waste accounting for a whopping “20 to 25 percent of American health care spending”, and according to the same article, “exceeds the total US military expenditures in 2019”? You already know the answer if you work in medicine.

“Administrative complexity” is the biggest source of waste according to the JAMA article accounting for $265.6 billion dollars. You don’t need a large-scale study to come to this conclusion. You can go to just about any hospital in the country and see the tremendous amount of waste from the senseless coding, billing, over documentation, pointless meetings, overpaid and do-nothing administrators and executives. This waste adds nothing to patient or provider well-being and accounts of about one quarter of what Americans spend annually on health services.

In descending order, the following are the categories that the JAMA article came up with for sources of waste:

                       1. Administrative complexity

                       2. Pricing Failure

                       3. Failure of care delivery

                       4. Over treatment or low-value careFraud and abuse

                       5. Failure of coordination of care

And doctor, remember, the average person on the street thinks all of this waste is YOUR fault. You are too rich and too greedy. Since you are the face of medicine, you must be responsible. You probably have no control of billing or policy or waste, but it’s your fault anyway.

But is it? No. It’s not your fault, my friend. According to a 2017 Forbes article "Debunking Myths: Physicians’ Incomes are Too High and They are the Cause of Rising Health Care Costs" by Price and Norbeck[2]:

The total amount Americans pay their physicians, as Reinhardt reminds us, represents only about 20 percent of total national health spending. Of this total, close to half (editor’s note: higher now), is absorbed by physician practice expenses, including “malpractice premiums, but excluding the amortization of college and medical school debt." 

So, your salary is much less than the 25% of waste in the system, and what you get to take home after taxes, expenses, loan payments, malpractice insurance, etc… is much less.

Durden suggests that “government involvement in healthcare is a major reason it is so expensive” and “removing government from the equation completely” could reduce costs to a reasonable level. His analysis is more complex and nuanced but overall, this would be a good summary of the major problem and solution to the gargantuan and rising costs of health care in the US.

Durden also quotes a 2016 study[3] that “found that doctors spend almost twice as much time on administrative work (49% of their time) as they did seeing patients (27%). Physicians also took another one to two hours of clerical work home with them each night.”

We all know that senseless paperwork does not serve the interests of patients and demoralizes physicians. But today as a highly trained physician this endless documentation and mouse clicking is the central part of your job. An absurdity to which we all tacitly and meekly acquiesce.

But it is not just government and overregulation that has ruined our healthcare system. It is also the sheer volume of money to be made by tapping into the system and milking it. Hospitals and healthcare have become gigantic ATMs and access points through which tremendous amount of money flow. Factories where human misery is converted into large sums of cash, a small fraction of which goes to those who provide services and save lives, with the lion’s share siphoned off by bureaucrats and a parasitic system.

Many of us suspect that the current health care network consolidation going on all over the country is making the system worse and instead of reducing costs and making healthcare better, is increasing costs (by creating monopolies), and making delivery worse by treating patients like widgets, and doctors like disposable cogs.

Toddy Shyrock in his eye-opening article Private Equity in healthcare[4], brings us the fabulous news that Wall Street is coming to gobble up your practice or one near you. How does this work? It’s all very depressing and is summarized in the article as follows:

Private equity firms work by pooling money from investors that they use to buy businesses, create value beyond the purchase price, then sell off the combined portfolio company and return the profits to the investors, says William Spratt Jr., JD, partner, healthcare, for the law firm of Akerman LLP in Miami. Often, the strategy in healthcare is to either combine multiple practices of the same type to dominate a market, or create a large multispecialty practice.

So this is yet another form of centralization meant, as Shyrock's article suggests, to “control a region and have groups large enough to compete for contracts or drive rates.” In other words to create monopolies. If this is not a prescription for higher costs for everyone we don’t know what is.

The article goes on to describe how physician who end up working for these systems taken over by private equity firms tend to see a 30 percent drop in compensation wiping out any profit they may see from the sale of their practice and that “physician won’t have any say in the new company.”

Basically less pay, no say.

Wall Street tycoons and their lackeys who are in favor of this system will certainly dispute this claim and will trot out examples of rich, retired physicians on boats, and successful consolidated thriving practices as proof that private equity is a boon to physicians, patients, and investors alike. But beware of the money men who come to you and promise that they are there to help.

Twenty years ago HMOs were going to revolutionize the delivery of healthcare and reduce costs, empower physicians, and patients. Twenty years later we have the system that we all suffer under now.

What impact has private equity had on other industries and the economy at large? A recent Forbes article provides an unflattering picture.[5] The ultimate answer to that question will likely point to what the future holds for our dumpster fire of a health care industry.





[1] Waste in the US Health Care System Estimated Costs and Potential Savings, Shrank et. al., JAMA 2019;322(15): 1501-1509.





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