It is no surprise then that a majority of American doctors say that generating bills and collecting payments is a major problem. Canadian practices spend only 27 percent of what U.S. ones do on dealing with payers like Medicare or private insurers. Another study in Health Affairs surveyed physicians and physician practice administrators about billing tasks. It found that doctors spend about three hours per week dealing with billing-related matters. For each doctor, a further 19 hours per week are spent by medical support workers. And 36 hours per week of administrators’ time is consumed in this way. Added together, this time costs an additional $68,000 per year per physician (in 2006). Because these are administrative costs, that’s above and beyond the cost associated with direct provision of medical care. In JAMA, scholars from Harvard and Duke examined the billing-related costs in an academic medical center. Their study essentially followed bills through the system to see how much time different types of medical workers spent in generating and processing them. At the low end, such activities accounted for only 3 percent of revenue for surgical procedures, perhaps because surgery is itself so expensive. At the high end, 25 percent of emergency department visit revenue went toward billing costs. Primary care visits were in the middle, with billing functions accounting for 15 percent of revenue, or about $100,000 per year per primary care provider. “The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a co-author of the study and a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.” Costs related to billing appear to be growing. A literature review by Elsa Pearson, a policy analyst with the Boston University School of Public Health, found that in 2009 they accounted for about 14 percent of total health expenditures. By 2012, the figure was closer to 17 percent. One obvious source of complexity of the American health system is its multiplicity of payers. A typical hospital has to contend not just with several public health programs, like Medicare and Medicaid, but also with many private insurers, each with its own set of procedures and forms (whether electronic or paper) for billing and collecting payment. By one estimate, 80 percent of the billing-related costs in the United States are because of contending with this added complexity.
The complexity of the US health care system leads to astonishingly high administrative costs. Because administrative costs are not directly related to patient care, people rarely think about them. A report in the The New England Journal of Medicine used data from 1999 to estimate that about 30 percent of US health care expenditures were due to administration – about the twice what it is in Canada. If those figures hold today, some $5,700 of the average $19,000 US workers and their employers pay for family cover each year goes on administration costs. Not all of these costs are bad. Some go towards a quality improvement program, while others are for things we may dislike such as working out which claims to accept or reject. Some costs are indeed required, such as maintaining information systems or processing payments. The study is still the only one that addresses costs of the entire health care system but others examining portions of indicate the story remains the same. The US health care system’s administrative costs are the largest in the world, as is its overall cost as a system. A study published in Health Affairs, using 2010 and 2011 data, compared US hospital administrative costs with those in seven others – Canada, Scotland, England, Wales, France, Germany and the Netherlands. American hospital administrative costs exceeded all others, accounting for 25 percent of total spending and 1.4 percent of total US GDP, compared to 20 percent of hospital and 0.8 percent of economic output in the Netherlands. Meanwhile Canada and Scotland spend about 12 percent of hospital costs on administration and about 0.5 percent of GDP. GDP on administration. For every 10 physicians providing care, another seven are estimated to be involved in billing-related activities. A majority of US doctors say generating bills and getting payments is a big problem – with Canadian practices spending only 27 percent of what US physicians do in handling payers like private insurers and Medicare. Kevin Schulman, co-author of another study published in JAMA and professor of medicine at Duke, said high administrative costs were “functions of the system’s complexity.” An obvious source of this complexity is the multitude of payers involved in the system, including public health schemes as well as private insurers. An additional source of health care provider costs is chasing payments from patients for their portion of the bills and with more deductibles and co-payments on the rise, more patients are facing cost sharing they may not be able to afford. This means rising costs for providers and collection agencies to recoup the money owed. A lot of choice – including among health care plans – is a distinctive feature of the US health system. But the lack of co-ordination on pricing, billing and collection leads to a high administrative burden, which also drives high health care prices.