And both will be increasingly valuable as health reform increases demand for care, says Jessee, who argues “just intuitively” administrative costs should drop if insurers replace multiple claims processes with one standard. “If you want to control healthcare costs, one of the easiest places to start” is standardizing insurance claims, he says.
The findings, published online in the journal Health Affairs, first calculated the 2006 labor and overhead costs to handle insurance claims at one large academic physician group practice.
The study estimates savings of $44 million (11.9% of the group's patient revenue) if all insurers use Medicare payment rules to process all of their insurance claims.
Such a practice would standardize commercial insurers' frequently changing rules, claim submission deadlines and payment posting rules. It would eliminate outpatient referral rules, and providers would benefit from prompt response to claims and electronic processing, according to the study.
Overhead and billing office labor costs accounted for $5.6 million of the $44 million. The group lost another $6 million in revenue for wrongly denied claims, according to the paper.
The rest (roughly $33 million) stemmed from labor costs for doctors, nurses and administrative staff to wrangle with insurers over claims. Of that amount, physician labor costs totaled about $28 million, based on an estimate that doctors spent four hours per week on claims.
That is time better spent with patients, says Gregg Meyer, M.D., senior vice president for quality and safety at the Massachusetts General Physicians Organization and Massachusetts General Hospital.
Meyer—who joined the Boston hospital after five years with the Agency for Healthcare Research and Quality, where he was director of the Center for Quality Improvement and Patient Safety—was one of the five researchers behind the study published in Health Affairs.
Meyer proposed the research, which he says he hopes will motivate insurers, consumers and physicians to focus on the burden created by insurance claims by attaching a cost to administration that could be erased.
On return to private practice in 2002, Meyer says he was surprised by the time and resources used to process claims. He argues insurers face an equal, if not larger, administrative burden, adding to the unnecessary cost.
Meyer and his co-authors note that health reform laws passed earlier this year call for some insurance claims changes but fall short of standardization. “This could be a great, tightly packaged piece of incremental reform,” he says.
The MGMA, in a mid-May letter to HHS Secretary Kathleen Sebelius, called for the agency to include medical group claim processing costs in insurers' administrative expenses under the health reform law's regulation of the medical-loss ratio, or the ratio of how much insurers spend on healthcare, quality improvement, administration and profit.
“By including these onerous administrative costs in the calculation of health plan costs, plans would be pressured to more quickly standardize, simplify and automate many of these interactions between plans and medical providers,” the letter noted.
Meyer says that eliminating unnecessary spending is important, but he believes the more significant cost is the trade-off doctors must make to spend time on handling insurance claims. “It's one we can't afford,” he says. “It's not adding value.”