Practice Interactions With Health Plans Cost $31 Billion A Year
As policy-makers consider ways to cut health costs
as a part of health reform, a new national survey of physician
practices finds that physicians on average are spending the equivalent
of three work weeks annually on administrative tasks required by health
According to the study by Dr. Lawrence P. Casalino
of Weill Cornell Medical College, and colleagues, physician practices
report that overall the costs of interacting with insurance plans is
$31 billion annually and 6.9 percent of all U.S. expenditures for
physician and clinical services.
The study, published in the online issue of Health
Affairs, was co-funded by The Commonwealth Fund and the Robert Wood
Johnson Foundation’s Changes in Health Care Financing and
Organization (HCFO) Initiative.
The survey of physician practices across the U.S.
inquired about time spent by all practice staff on specific activities,
including prior authorization, pharmaceutical formularies, claims and
billing, credentialing, contracting, and collecting and reporting
This national survey is the first to ask directly
about time spent by non-physician staff on interaction with health
plans, and the first to provide data by the type of interaction, type
of staff, specialty and practice size.
On average, physicians spent three hours a week or
nearly three weeks per year on these activities, while nursing staff
spent more than 23 weeks per physician per year, and clerical staff
spent 44 weeks per physician per year interacting with health plans.
More than three in four respondents said the costs of interacting with
health plans have increased over the past two years.
"While there are benefits to physician
offices’ interactions with health plans — which
may, for example, help to reduce unnecessary care or the inappropriate
use of medication — it would be useful to explore the extent
to which these benefits are large enough to justify spending three
weeks annually of physician time or one-third of the average primary
care physician’s compensation on physician practice-health
plan interaction," said Casalino. "It would also be useful to explore
ways to make the interactions more efficient, both on the health plan
side and in physician offices."
Other study findings include:
- Physicians — especially primary care
physicians — in a solo or two-person practice spent
significantly more hours interacting with health plans than physicians
in practices with 10 or more physicians.
- Across practices, physicians and their staffs
spent substantially more time on authorization, formularies, claims and
billing and credentialing than they did on submitting quality data or
reviewing quality data provided by health plans.
A Closer Look at Billing and
A separate study, also published in the online
issue of Health Affairs and co-funded by The Commonwealth Fund and
HCFO, provides an in-depth look at the billing and insurance-related
activities performed at a large multi-site, multi-specialty group
practice in California to get paid for clinical services.
The study found that clinicians spent more than 35
minutes per day performing billing and insurance-related tasks and that
these activities also required the equivalent of 0.67 non-clinical full
time staff per full-time physician at an annual cost of $85,276 per
physician, representing 10 percent of operating revenue.
The authors note that, even though the practice
studied uses an electronic medical record system for billing and
clinical record keeping and has implemented extensive automation, the
complexity of serving patients covered by hundreds of specific
insurance plans, each with different benefits, payment rates and
billing procedures, greatly adds to the administrative workload. The
challenge of managing these widely varying requirements increase the
chance of billing error and dispute and the likelihood of requiring
payment follow-up and collections.
"We believe that while minimizing billing and
insurance-related administration activities is not the only goal of the
healthcare system reform, standardizing health plan features and
processing requirements presents a tremendous opportunity for improving
efficiency in a multi-payer healthcare system," said lead study author
Julie Sakowski, a senior health services researcher at the Sutter
Health Institute for Research and Education.
Addresses: Weill Cornell Medical College, 425 E.
61st St., New York, NY 10021; (212) 821-0560, http://weilcornell.edu.
Sutter Health Institute for Research and Education, 345 California St.,
Suite 2000, San Francisco, CA 94104; (415) 916-1820, www.sutterhealth.org.