As every American knows, the process of billing third-party entities for health care services is complex and time-consuming, for the patient as well as for the provider.  According to the authors of an article published yesterday in Health Affairs, physicians use nearly 12 percent of their net revenue to cover the costs of these administrative charges.

To improve this situation, Bonnie Blanchfield of Massachusetts General Hospital and her colleagues have created a hypothetical model, consisting of a single, transparent set of payment rules for multiple payers, a single claim form, and standard rules of submission. They estimate that the changes could result in $7 billion of annual savings for physician and clinical services billings, and four hours per physician and five hours per practice support staff each week.

To evaluate and identify the burden of excessive administrative complexity, the authors used case-study methods to analyze the billing system of the physician organization at a large, urban, academic teaching hospital. They initially identified actual administrative functions and the costs pertaining to the billing, processing, and paying of claims for the organization in 2006. The areas found to be the most excessively complex were the processing and receipt of payments for physicians’ services, and the administrative functions of physicians and staff in the clinical practices of the organization. One factor compounded the administrative burdens: Up to 12.6 percent of submitted claims are initially rejected based on nonclinical grounds, although 81 percent are eventually paid. The authors’ hypothetical model had a single, transparent set of payment rules and reduced the interaction of billing staff with payers, reduced the reprocessing of claims and the reentry and repetition of tasks previously performed, reduced the number of claims initially rejected, and lessened the time spent reviewing payment guidelines.

With the passage of health reform legislation, scaling back on administrative complexity is an area needing more careful review. “The savings from reducing administrative complexity could be translated into decreased costs in general,” conclude the authors.  “Mandating a single set of rules, a single claim form, standard rules of submission, and transparent payment adjudication—with corresponding savings to both providers and payers—could provide systemwide savings that could translate into better care for Americans.”

The study by Blanchfield and coauthors was discussed yesterday in the Wall Street Journal Health Blog. A study published last year by Health Affairs, in which Lawrence Casalino of Weill Cornell Medical College and coauthors found that physicians in private practice on average spent nearly three weeks in time dealing with administrative bill tasks required by health plans, was also discussed yesterday by Pauline Chen of the New York Times.