Administrative Waste In Office Practice

Today’s Managing Health Care Costs Indicator is

$7 billion dollars

Even in health care, $7 billion is a lot of money.   Athenahealth, a major force in physician billing, puts out a “pain in the butt” index each year, indicating how difficult each insurer makes it for physicians to collect their fees.  Athenahealth suggests that the excess cost of physician billing due to the multitude of different rules and different requirements from health plans is $7 billion. There, I’ve said it three times.

A few ‘fun facts’ from the NPR Planet Money podcast  about this:

  • o   The average physician gets 1000 faxes from insurers each month
  • o   Athenahealth bills 1700 different insurers. This vastly understates the issue, since each insurer has hundreds or thousands of plan designs, often dictated by self-insured employers.


Researchers at the Mass General Physicians Organization published an insightful article in Health Affairs a few months back  simulating how much money this physician practice spends coping with the myriad of different insurer rules and requirements.  I’m pretty sure this article is where the $7 billion figure comes from.    The researchers built a new staffing model assuming that there was a single payer with uniform Medicare-like rules, and were able to reduce their total office costs by 12%.              

A few critical findings from this study (of 2006 claims)
  • o   18.2% of claims were rejected in the first place on ‘nonclinical’ grounds. It’s hard to reject a clain on clinical grounds!
  • o   They calculated wasted physician time per physician at 4 hours per week, and wasted nurse time at 5 hours per week.
  • o   4 out of every 5 rejected claims were eventually paid

The MGH researchers only calculated the cost of this patchwork system in the physician office.  This calculation doesn’t include the cost of processing on the health plan side.

There’s no perfect answer to this mess.  HIPAA had requirements for standardizing billing requirements, and billing is much better structured already then, say, electronic medical records

I’m not confident that eliminating administrative waste alone would make health care affordable,.  But clearly creating administrative efficiency will be critical to managing health care costs.