In search of simplicity

Seven years have passed since the Medical Group Management Association board of directors adopted a policy calling for standardizing and simplifying the healthcare payment system in the U.S. At the time that policy was adopted in 2003, the MGMA was one of the first voices calling for such change to occur. But we were soon joined by the American Academy of Family Physicians and the American Health Information Management Association (among others), with whom we partnered to launch the Healthcare Administrative Simplification Coalition.

The problem we faced in 2003 has not gone away. Administrative costs consume as much as 30% of every dollar spent on healthcare. Medical practices' interactions with health insurers generate, on average, expenses of more than $68,000 per physician each year. While the costs incurred by hospitals, nursing homes, home health agencies and other providers for those same insurer interactions are less well-documented, they are similarly large. And the impacts of administrative complexity on physicians, administrators and patients are not only financial; they often run the gamut from headaches, to gray hair, to ulcers.

But progress is being made. The MGMA is no longer the lonely voice we were in 2003. The small group of organizations that formed the coalition have been joined by an increasing chorus singing the same tune. And some of the members of that chorus, including HHS Secretary Kathleen Sebelius, CMS Administrator Donald Berwick and leading figures in both the House and the Senate, are in positions to do something about the problem.

Last summer, the Institute of Medicine held a series of three workshops addressing waste in the healthcare system. While the final report of those events has not yet been published, it is notable that a significant number of the presentations during the workshops were focused on identifying waste associated with unnecessarily complex or duplicative administrative processes—primarily those surrounding the insurance payment system. One of the presenters, from the Massachusetts General Physicians Organization, recently published data in Health Affairs and reported that excessive administrative complexity consumed 12% of net patient service revenue in their very efficient medical group.

The Council for Affordable Quality Healthcare has made notable progress toward reducing two significant sources of administrative waste. First, they have succeeded in getting almost all the national health insurance plans to use a single electronic database for physician credentialing, in lieu of the multiple applications that were formerly used. Unfortunately, the nation's largest payer, Medicare, is a significant holdout from adopting the CAQH process.

Second, the CAQH has been able to get many of the leading insurers and vendors of practice management information systems to agree on common standards (through their Committee on Operating Rules for Information Exchange, also known as CORE) for electronic insurance eligibility, coverage and claims status queries. As a result of these CORE standards, providers can now get timely, robust coverage information, or find out the status of claims, on patients covered by those insurers who pledge to adhere to these voluntary standards.

Perhaps most significantly, the Patient Protection and Affordable Care Act, signed into law in March, contained several administrative simplification provisions the MGMA has long pursued. Among these are:

• Mandating that standard operating rules for electronic verification of insurance eligibility and for the status of insurance claims be developed by July 1, 2011, and implemented by insurers by Jan. 1, 2013. Operating rules for the other electronic administrative transactions to follow.
• Machine-readable insurance ID cards may be included in the rules above.
• Standardized processes for electronic funds transfer and for electronic explanations of benefits (allowing automatic reconciliation of billed amounts to funds received) must be implemented by Jan. 1, 2014.
• A system of unique health insurance plan identifiers must be in place by Jan. 1, 2014.
• Standardized rules for electronic claims attachments must be implemented by Jan. 1, 2014.
• Significant penalties for insurers not certified as fully compliant with applicable standards and operating rules.

While each of these is a small victory in the war against administrative waste, it is unfortunate that even the simplest of them will not go into effect for several years. Medicare, in particular, could play a major role in encouraging the adoption of standardized and streamlined electronic processes by the entire insurance industry. It is a bit ironic that, at the same time that Medicare is investing billions to encourage physicians and hospitals to adopt electronic medical records, the almost 47 million Medicare beneficiaries still carry paper identification cards. As a consequence, physician practices and other providers still make copies of those cards and manually enter the information into their claims systems—rather than simply swiping the card, as they could do if it was machine-readable.

We hope that the CMS and the office of the secretary will see fit to exercise their authority to move ahead on the Affordable Care Act changes earlier than the dates required by the statute. Even more important, we hope they will see fit to assume a leadership role in reducing administrative costs by making changes to their own operations to bring them into the digital age. While there always is a cost associated with changing any administrative process, the earlier these changes are put into place, the earlier the savings can begin to accrue.

William Jessee is president and CEO of the Medical Group Management Association, Englewood, Colo.