Billing and Insurance-related Costs for Providers

By February 22, 2018 Commentary

One of the supposed defects often cited by critics of the US health system is its high administrative costs, particularly for providers in regard to billing multiple payers.  The push for more IT in health care was supposed to ameliorate this problem, but a new study in the Journal of the American Medical Association suggests this is unlikely to have been the case.   (JAMA Study)   The authors used only one large academic health system (always models of administrative efficiency) which had a fully integrated EHR system.  They used a time driven activity-based costing method, and looked at billing costs in regard to multiple types of patient visits, including inpatient, ER and primary care.  Billing for the provider is done by 1500 FTEs, which alone tells you something about either the efficiency of the provider or the complexity of administrative processes.  The complete revenue cycle process was mapped and the time and cost associated with it was calculated.  Unfortunately, a lot of the time estimates, were just that, subjective responses from billing staff and physicians, who very likely are over-estimating the time involved.

Here are the total costs associated with the revenue cycle process for the average bill in the following categories–primary care, $20.49; ER visit, $61.54; inpatient stay, $124.26; ambulatory surgery, $170.40; and inpatient surgery, $215.10.  Note that about 30% of the cost for each of these categories is listed as general overhead.  10% to 20% is actually scheduling and patient registration costs; not sure how you avoid those.  And the alleged time spent per bill in some categories simply seems absurd, for example, 100 minutes on an inpatient surgery bill?  Something is clearly wrong in the billing department if the systems are incapable of handling a bill faster than that.  And some of the time is the back and forth on bills that payers, usually rightly, challenge for some reason.  These costs represent a substantial fraction of the amounts collected from a payer for the services.  Reducing administrative costs is a serious and important challenge in the health system.   But this study is hard to take at face value and frankly, if I were the Duke Medical Center, I would be appalled at the obvious poor management of my billing function.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

More posts by Kevin Roche

Leave a Reply