The Hidden Cost Behind Care Delivery Variation

GE Healthcare

Defining Care Delivery Variation: Healthcare expenditures accounted for almost 18 percent of the US GDP in 2018.1

Yet, in spite of the enormous spending on healthcare, numerous studies have shown that the underuse, misuse, and overuse of medical services continues to contribute to wasted resources and suboptimal patient outcomes.1,2

Various analyses of the sources of these excessive costs have pointed to variation in care delivery that, even with advent of quality and payment reforms, have continued to create major gaps in the effective delivery and quality of healthcare.

Care variation may lead to unnecessary errors, delays and bottlenecks in patient care and transitions of care, as well as complications and adverse events such as hospital-acquired conditions.1

In delving further into the root causes, care variation is most often attributable to a variety of standards: fragmented care coordination, lack of adherence to evidence-based clinical pathways, and poor standardization and integration of pathways into the clinician workflow.1,3

Impact of Care Delivery Variation on Costs

An analysis of healthcare cost and quality data from 468 hospitals from April 2014 to March 2017, conducted by the Advisory Board, a research consultancy focused on best practices in healthcare, found that high-quality hospitals delivered lower cost care for approximately 82% of diagnoses by reducing care variation. This reduction resulted in better patient outcomes, such as lower complication rates.4 

In contrast, the average hospital spent up to 30% more to deliver care with comparable or lower quality outcomes.4

In a 2019 study published in the Journal of the American Medical Association (JAMA), the costs associated with specific “domains of waste” within the healthcare system were analyzed from 2012 to 2019.1 

The study found that the topmost areas of waste were the enormous costs associated with failures of care delivery and failures of care coordination.1 

Failures in care coordination were linked to unnecessary admissions, readmissions, and avoidable complications amounting to estimated annual costs of waste ranging from $27.2 billion to $78.2 billion.1 

In the case of failures of care delivery, poor execution, or the lack of widespread adoption, of standardized best care processes resulted in estimated annual losses ranging from $102.4 billion to $165.7 billion.1

Another category of excess spending identified in the study was administrative complexity caused by lack of standardized regulatory and reimbursement forms and procedures, resulting in needlessly complex and time-consuming work for clinicians and staff that resulted in less time spent providing patient care.1

In addition to the huge direct and indirect costs associated with care variation, it’s well documented that the inefficiencies caused by care variation have also contribute to lower rates of patient safety and satisfaction.1 

More recently, studies have shown that clinician time spent online, documenting electronic health records and quality metrics, have led to high rates of burnout which is associated with increasing medical errors.5

Approaches to Reducing Care Delivery Variation

Given the results of these various studies, it’s not surprising that multiple interventions have been identified to reduce care variation.

These include: standardized clinical pathways that can help reduce over-utilization of resources, care redesign initiatives that promote coordinated, interdisciplinary care, and performance metrics that incentivize reducing complications and hospital readmissions--all of which have the potential to reduce costs and engage physicians.1,3,4

Identifying the problem and implementing solutions requires that hospitals and health systems consider new approaches to constraining the costs of care they provide.6 

As a first step in implementing standardized clinical pathways, organizations must be able to determine the points of care variation across the care pathway in order to identify workflow and communication disconnects and ensure the right resources are in place.6 

Because care variation reflects numerous dynamics and disconnects within complex healthcare ecosystems, the use of predictive analytics, coupled with electronic medical record data (EMR), have been shown to assist clinicians in more effectively monitoring patients and help guide clinical decision-making.

New Technology, Newer Approaches to Reducing Care Delivery Variation 

Even more groundbreaking have been the introduction of command center approaches within hospitals and large health care systems that provide digital centralized monitoring capabilities that combine real-time data analytics with operational services to enhance coordination, quality, and efficiency in patient care.

In addition to making operations more streamlined and responsive to patients’ needs, centralized digital monitoring can also provide better patient vigilance, improve staff productivity by incorporating standardized clinical pathways and best practices into the workflow design, and boost care team collaboration.

As healthcare increasingly shifts from a volume to value-based system, necessitating an even greater focus on quality, cost containment, and patient-centered care, reducing care variation will be essential to succeeding in today's evolving and dynamic healthcare landscape.



1.Waste in the US Health Care System: Estimated Costs and Potential for Savings, JAMA Network, Journal of the American Medical Association, October 2019.

2. Variation in Health Care Spending, Institute of Medicine, National Academy of Sciences, 2013. Accessed October 22, 2019.

3. What Clinical Variation Means to A Hospital's Bottom Line: 4 Insights from The C-Suite, Becker’s Hospital Review, September 2016. Accessed October 23, 2019.

4. Care Variation Reduction Key to Improving Care Quality, Costs, RevCycle Intelligence, Xtelligent Healthcare Media October 2018. Accessed October 23, 2019.

5. A Crisis In Health Care: A Call to Action On Physician Burnout, Harvard Global Health Institute, Massachusetts Medical Society, 2018. Accessed November 4, 2019.

6. Three Assumptions Hospital Executives Must Shed to Achieve High Value Care, The Advisory Board, October 2018. Accessed October 24, 2019.