J. Tod Fetherling

CEO / Data Geek

Vilfredo Pareto's 80/20 Hypothesis Applies to Healthcare

Vilfredo Pareto hypothesized the 80/20 rule which became known as the Pareto Principle. In his study, he found 20% of the people owned 80% of the land in Italy.

Using the same basis, we hypothesized that 20% of the patients consume 80% of healthcare's spend. As luck (or more appropriately science) would have it, we were not far off. Using more than 3.5 billion claims from 2015 and 2016, we found that 17.8% of the patients consume 80% of the spend.  

In healthcare, like land ownership in Italy, a large portion of our expenditures as an industry is being consumed by a small percentage of users. Most of this phenomenon in healthcare is driven by multiple chronic diseases that affect a disproportionately growing number of Americans.

Today, we understand how utilization translates into different care options for patients. What if we could lower healthcare costs by 20% by just getting the right patients to the right providers?