It is undoubtedly the case that administrative costs are one reason we have high health spending. A study in Health Affairs describes some of the difficulties with physician billing and reimbursement processes in particular. (HA Article) It has been estimated that physician offices spend as much as $30 billion a year on payment work. The authors attempted to use data from several physician practices to detail the exact work effort and costs associated with reimbursement processes. The information came from bills submitted in 2013 to 2015 and showed the initial submission, any response from the payer, resubmissions and the ultimate resolution. Relative effort was able to be adjusted for patient complexity. Five specialties were included–cardiology, internal and family medicine, obstetrics and gynecology, orthopedics and pediatrics. The researchers compared the 68,000 doctors from which billing data was collected with all practices nationally and found them to be representative. For each service, the authors analyzed time to payment, number of interactions with the payer, claim denial and non-payment. Fee-for-service Medicare and private insurance each accounted for about 40% of all claims in the study, Medicare Advantage was about 15%, and the remainder was Medicaid.
Medicaid, both fee-for-service and managed care, is far and away the most “complex” (i.e., difficult) payer for physician outpatient reimbursement. It took almost twice as long for a FFS Medicaid claim to be paid as a FFS Medicare one, and significantly more Medicaid claims were challenged or denied. Couple this with the lowest reimbursement rates and you see why doctors are so eager to take Medicaid patients. Private insurers challenged the fewest number of claims, only 6%. Medicare and private insurance had roughly identical results, which may reflect the fact that so many private insurers have adopted Medicare coverage policies and fee schedules. More complex bills, those with more service lines, tended to have higher administrative costs, as you would expect. While the results for Medicare and private insurance were basically flat from 2013 to 2015, Medicaid improved its payment time significantly, but from a woeful average 101 days to 54 days. Wait two months to get an inadequate payment. There was variation as well across private insurers, with Aetna and UnitedHealth challenging lower amounts of bills and Cigna and Humana higher ones. Overall, the study indicates that interacting with private insurance and Medicare is probably much less costly than interacting with Medicaid.