The U.S. system of billing for health care is complex, expensive, and inefficient. Excessive administrative complexity costs physicians nearly 12 percent of their net patient service revenue, according to a Commonwealth Fund–supported study. Streamlining administrative processes associated with the billing and payment of medical providers could save $7 billion annually, and save four hours per week of physicians' time and five hours of support staff time.
- For the organization studied, the cost of excessive administrative complexity, including both expenses (i.e., the labor costs) and lost revenue (i.e., revenue lost when claims are inappropriately rejected, delayed, and reprocessed or when the reimbursement rate is lowered) was nearly $45 million in 2006, or 12 percent of net patient revenue.
- The largest portion of the administrative complexity burden, 74 percent, was attributed to time spent by physicians and their office staff in preparing paperwork and contacting payers about prescriptions, diagnoses, treatment plans, and referrals.
- About 12.5 percent of the total burden, or $5.6 million, was directly associated with the processing and billing of claims in the professional billing office.
- On a national scale, adopting streamlined administrative rules would translate into $7 billion of savings annually. It would also save four hours of physician time and five hours of support staff time per week.
Addressing the Problem
About This Study
The authors analyzed the administrative workload at a physicians' organization affiliated with a large, urban, academic teaching hospital. The organization works with multiple payers, all with different payment requirements. First, the authors identified administrative functions, staffing, and associated costs related to the billing, processing, and payment of claims in 2006. Then, using a model that was stripped of the excessive complexity, they estimated the costs of processing the same claims.
Streamlining administrative costs associated with the billing and payment of medical providers could save $7 billion annually, and save four hours per week of physicians' time and five hours of support staff time.