Health Affairs: Simpler billing processes could create major savings

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The U.S. system of billing third parties for health care services is complex, expensive and inefficient, and physicians end up using nearly 12 percent of their net patient service revenue to cover the costs of excessive administrative complexity, according to an article in the April edition of Health Affairs.

Bonnie B. Blanchfield, senior research scientist at Massachusetts General Hospital in Boston, and colleagues, used case-study methods to examine and identify the excessive administrative complexity burden imposed on a large urban-based academic teaching hospital’s physician organization.

Blanchfield and colleagues first identified the actual administrative functions, staffing and associated costs relating to the billing, processing and payments of fiscal year (FY) 2006 claims for the organization’s professional billing office and clinical practice. Then a revised staffing model was developed, assuming that the same claims were being processed under a hypothetical set of payment requirements identifying the functions, staffing and associated costs for both the professional billing office and the clinical practices.

According to the study, the excessive administrative complexity of the payment system was found to exist primarily in two areas: processing and receipt of payments for physician services in the professional billing office; and administrative functions of physicians and their staffs in the clinical practices.

“In FY 2006, the cost of excessive administrative complexity, including both expenses and lost revenue, was nearly $45 million for this organization, or 11.9 percent of net patient revenue,“ stated the authors. “This represents $8.43 of net patient revenue per dollar of burden spent, or $50,250 in burden per physician.”

Of the total estimated administrative complexity burden, 12.5 percent, or $5.6 million, was directly associated with the processing and billing of claims in the professional billing office, according to Blanchfield and colleagues.

The authors discussed some reforms that “go beyond those planned for 2013 in the Patient Protection and Affordable Care Act (PPACA).” PPACA directs health plans to adopt and implement uniform standards for the electronic exchange of health information by 2013, to reduce paperwork and administrative costs. “However, this provision will not address the larger problems of excessive, different and changing requirements imposed on the exchange of all health information, including billing information,” the authors wrote.

An incremental move to one set of payment rules would yield significant dollar savings as well as work-life and productivity opportunities for physicians and their office staffs, according to the report. “Done carefully, administrative simplification could still leave room for a diversity of insurance products and could promote innovation without relying on blunt and opaque administrative processes as a tool,” the authors stated.

Many of the changes under the single-rule-set scenario would result in decreased costs for payers as well, and would provide resources that could be passed on as savings to purchasers and patients or could be used to provide additional needed health services, the authors noted.

A single transparent set of payment rules for multiple payers, a single claim form and standard rules of submission, among other innovations, would reduce the burden on the billing offices of physician organizations, concluded the authors. “On a national scale, our hypothetical modeling of these changes would translate into $7 billion of savings annually for physician and clinical services. Four hours of professional time per physician and five hours of practice support staff time could be saved each week.”