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Could Medtronic, Inc. (MDT), Abbott Laboratories (ABT): This Idea Cut $35 Billion from Health Care Costs?

Take $1 out of every $3 spent on health care, throw it in the garbage can — and pretty soon those dollars add up to a big amount. The National Academy of Sciences’ Institute of Medicine says that around one-third of total U.S. health care spending is wasteful. That totals around $750 billion every year.

Medtronic Inc. (NYSE:MDT)

A new study from the West Health Institute, or WHI, says that $35 billion of that waste could be eliminated by focusing on one area: medical device interoperability. That’s the term used to describe what basically translates to making the devices and equipment seen in hospitals talk to each other and to other health systems. In a recent report, WHI identified four ways that this idea could achieve huge savings.

Reducing adverse events
According to WHI, $2 billion is thrown down the tubes every year due to adverse events that could have been avoided with solid medical device interoperability. This number doesn’t seem unreasonable when we consider that an estimated 3 million preventable adverse events occur every year in the U.S. due to medical errors. Some researchers think that as many as 98,000 Americans die each year due to these errors.

WHI argues that connecting medical devices to the clinical systems used by medical staff would help tremendously. As an example, the organization points to a hypothetical scenario where wrong numbers are programmed into an infusion pump, resulting in the death of a cancer patient. Had the infusion pump been tied in with the patient’s electronic chart containing the physician’s order with the correct dosage, the horrible outcome and associated costs could have been averted.

Reducing redundant testing
A 2009 study reported in Health Affairs concluded that more than $8 billion is wasted each year because of redundant lab and radiology testing. WHI thinks that at least $3 billion of that total could be prevented by connecting medical devices and clinical systems.

Let’s say you go to an outpatient center and have lab tests run. Your doctor determines that you need to be admitted to the hospital. After arriving at the hospital, the same tests are run again. Why? It could be that the original results were never sent. Possibly the results were faxed but misplaced. Either way, duplicate costs are incurred.

Now suppose the lab equipment talked to the electronic health record, or EHR, system at the outpatient center and automatically sent the results to the hospital’s EHR when you were sent on for admission. No more tests — and no more dollars spent.

Reducing manual entry
Even bigger savings, according to WHI, would come from cutting out the time spent by nurses and other medical staff manually entering information. The organization estimates that more than $12 billion could be freed up if medical device interoperability eliminated most of this manual effort.

Just think about how things typically work now. A nurse goes into a patient’s room to check vital signs such as blood pressure, temperature, and pulse rate. The nurse jots the information down on paper but later must type the information into the patient’s electronic chart. Studies have found that as much as 35% of a nurse’s time is spent on this type of documentation. Automating the process would save money — and allow nurses to spend more time providing care.

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