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Twenty Bucks for an Aspirin? Blame the Paperwork

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That $20 aspirin on your hospital bill should cost about $13.33, at least if all the administrative work and rework is taken out of its cost, according to a new study conducted by the research firm Chadwick Martin Bailey in Boston.

The study, funded by PNC Financial Services Group, contends that about one-third of all healthcare costs can be attributed to administration—an unacceptably high share, according to the 1,000 consumers who were surveyed along with 200 hospital and insurance company executives.

PNC, which contends its expertise in electronic transactions from the banking world can help cut the costs of collecting payment for hospitals and other providers, attributes the high level of administration expense to the complexity of healthcare payment among dozens of different payers as well as the continued reliance on paper transactions for many providers.

Consumers think the administrative share of healthcare expenses should be no larger than 10 percent. Further, 79 percent of consumers want to know how much of their healthcare bill goes to administration.

Other findings:
  • Hospital executives reported that one in five claims submitted is delayed or denied and 96 percent of all claims must be submitted more than once.
  • Hospitals that do not use electronic billing or claims submission processes reported resubmitting a claim 11 times or more, or nearly four times more than those hospitals using electronic processes.
  • Insurance executives surveyed say they go back to hospitals twice, on average, to get all the information needed to pay a claim.
  • Nearly a quarter of consumers reported having had a legitimate claim denied by their health plan, and one in five ultimately paid the claim out of pocket.
“I don’t think there’s anyone to blame, per se; it’s a reflection of the complexity of the payment relationship between insurers and hospitals,” says Paula Fryland, executive vice president and manager of PNC’s national health care group. “The benefit we have in our system of choice and customization is part of what makes things more expensive.”

—Philip Betbeze