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Payers’ administrative practices costing physician offices as much as $31 billion annually

Physicians spend three hours per week?43 minutes on average per workday?haggling over claims, credentialing, authorizations, formularies, and other issues with health insurance plans, according to a study released in Health Affairs.

The Costs to Physician Practices of Interactions with Health Insurance Plans found that total staff interaction time systemwide converted to dollars equals $21?$31 billion annually?an average of more than $68,000 per physician per year.

?These data are yet another indicator of the dire need to streamline healthcare administration for physician practices,? says William F. Jessee, MD, FACMPE, president and CEO of the Medical Group Management Association (MGMA), which sponsored the study.

The study found that primary care physicians spend more time dealing with health plans than specialists. Nursing staff members spend nearly four hours per physician per day interacting with plans, and clerical staff members average 7.2 hours per day. Solo practitioners and their staffs spend up to 50% more time interacting with health plans than physicians in larger practices. Nonphysicians? staff time did not vary significantly by specialty.

Douglas Henley, MD, executive vice president and CEO of the American Academy of Family Physicians, says he?s not surprised that primary care physicians and their staffs spend the most time haggling with insurers. ?It?s because of the diversity of their practices compared with subspecialty colleagues,? Henley says. ?It?s a huge burden for the whole system, but particularly for primary care.?

Some physician interactions with insurers save money elsewhere in the system with issues such as precertification, ?but a large chunk of those dollars are for an unnecessary administrative burden that could clearly be streamlined,? he says.

Most primary care physicians contract with several health insurance companies, and each company may offer five or six different coverage plans, Henley says. ?What is the copay? What is the deductible? How much of that has been paid? What drugs are or aren?t on their formulary? What are the levels or different tiers of the formulary? It?s all different,? Henley says. ?We are talking about standardizing health information technology, and we ought to be able to standardize this type of administrative complexity and get beyond it.?

Robert Zirkelbach, director of strategic communications at America?s Health Insurance Plans (AHIP), says he can?t dispute cost claims in the MGMA study ?until I see what they calculated or how.? However, Zirkelbach says, AHIP is sympathetic to providers? concerns about the complicated, time-consuming, and expensive administrative processes that also waste money and time for health plans.

?This is not by any means a one-sided issue,? says Zirkelbach. ?Everybody agrees that we have to do more in the areas of health information technology to improve efficiencies and make the system work better for everyone involved.?

In response to this issue, MGMA wants a three-step reform plan that could save about $40 billion annually, Jessee says. The MGMA recommendations include:

  • Promulgation of a national health plan identifier regulation by the U.S. Department of Health and Human Services, which would simplify and improve healthcare transaction routing and save an estimated $8.8 billion annually
  • Promulgation of the national electronic claim attachment regulation, which would eliminate lost paper claims, accelerate the adjudication process, and eliminate the costs associated with filing and mailing paper documents, saving $9.4 billion annually
  • Standardization of machine-readable patient identification cards, reducing claims errors and administrative costs and eliminate many costs associated with paper records for a savings of $22.2 billion annually

The study classified interactions with health plans as authorization, formulary, claims/billing, credentialing, contracting, and quality data. Of those interactions, practices spend the most time dealing with formularies: Physicians spend 1.3 hours per week, and nursing staffs spend 3.6 hours per physician per week. Primary care physicians spend the most time?1.7 hours weekly?on formulary issues. Physicians and their staffs spend the least amount of time on submitting or reviewing quality data.

The problem could get worse if Medicare adopts reforms that will install the same administrative requirements as the private plans, such as for precertification, Henley says. ?If they subdivide that in a certain way, that could create an additional and unnecessary administrative burden,? he says.

The health insurance industry is pushing for standardization and uniformity in information exchange and administrative procedures to ?help physicians to interact with all of the health plans they contract with. This is an area that we have prioritized,? Zirkelbach says.

The survey includes responses from 1,310 primary care physicians, 580 specialists, and administrators from 629 group practices. The study does not distinguish between the interactive time spent with public and private health plans.