Changes in Physician Billing Could Save $7 Billion Per Year

Implementing a single set of payment rules for multiple payers with a single universal claim form and standard set of rules potentially could save $7 billion per year nationwide in fees for physician and clinical services, according to a study at one institution.

Those changes also could save 4 hours of professional time per physician and 5 hours of practice support staff time each week, according to Bonnie B. Blanchfield, a senior research scientist at Massachusetts General Hospital, Boston, and her coauthors (Health Affairs 2010 April 29 [doi:10.1377/hlthaff.2009.0075

“The U.S. health care system has generated byzantine systems of rules and regulations regarding payment for medical services. The result has been a growing and costly bureaucracy, which, in the end, pulls resources from direct patient care,” wrote Ms. Blanchfield and her coauthors, who included other researchers and financial officers from Massachusetts General Hospital and Massachusetts General Physicians Organization in Boston.

The study authors analyzed what they called the “excessive administrative complexity burden” imposed on a large, urban-based, academic teaching hospital's physician organization that contracts with multiple payers, each with different payment requirements.

For 2006, the study found that the cost of excessive administrative complexity, including expenses and lost revenue, was nearly $45 million for this organization, or nearly 12% of net patient revenue. This represented $50,250 per physician.

Out of the total estimated administrative complexity burden, almost three-fourths was attributed to the time costs incurred by practicing physicians and their office staff in preparing paperwork and contacting payers about prescriptions, diagnoses, treatment plans, and referrals. “Many of the subspecialty practices within the physician organization even have full-time staff members dedicated to referral processing,” they wrote.

On the revenue side, the study found that nearly 13% of billed charges for non-Medicare claims were denied on initial submission, and that 81% of these eventually are paid after appeals.

Non-Medicare payers ultimately deny more claims than Medicare does, usually because the physician's office has missed the filing limit date because of the initial rejection, the study found. If these legitimate claims had been paid, they would have been worth $6 million for the physician organization studied.

In addition, 29% of current professional billing staff effort is spent on processing and appealing claim denials that eventually are paid, the authors said.

The federal health reform legislation approved in March directs health plans to implement uniform standards for electronic health information exchange by 2013, but “will not address the larger problems of excessive, different, and changing requirements imposed on the exchange of all health information, including billing information.

“Thus, administrative complexity is likely to remain high and is likely to be a high-value 'target' for finding savings in ongoing incremental reforms.”

The savings from reducing administrative complexity by implementing a single set of rules and a single claim form could translate into decreased health care costs in general, Ms. Blanchfield and her colleagues noted.

“An incremental move to one set of payment rules would yield significant dollar savings as well as work-life and productivity opportunities,” the researchers said. “Administrative simplification could still leave room for a diversity of insurance products and could promote innovation without relying on blunt and opaque administrative processes as a tool.”

Disclosures: Support for the study was provided by the Robert Wood Johnson Foundation and the Commonwealth Fund. The authors reported no financial conflicts of interest.

Implementing a single set of payment rules for multiple payers with a single universal claim form and standard set of rules potentially could save $7 billion per year nationwide in fees for physician and clinical services, according to a study at one institution.

Those changes also could save 4 hours of professional time per physician and 5 hours of practice support staff time each week, according to Bonnie B. Blanchfield, a senior research scientist at Massachusetts General Hospital, Boston, and her coauthors (Health Affairs 2010 April 29 [doi:10.1377/hlthaff.2009.0075

“The U.S. health care system has generated byzantine systems of rules and regulations regarding payment for medical services. The result has been a growing and costly bureaucracy, which, in the end, pulls resources from direct patient care,” wrote Ms. Blanchfield and her coauthors, who included other researchers and financial officers from Massachusetts General Hospital and Massachusetts General Physicians Organization in Boston.

The study authors analyzed what they called the “excessive administrative complexity burden” imposed on a large, urban-based, academic teaching hospital's physician organization that contracts with multiple payers, each with different payment requirements.

For 2006, the study found that the cost of excessive administrative complexity, including expenses and lost revenue, was nearly $45 million for this organization, or nearly 12% of net patient revenue. This represented $50,250 per physician.

Out of the total estimated administrative complexity burden, almost three-fourths was attributed to the time costs incurred by practicing physicians and their office staff in preparing paperwork and contacting payers about prescriptions, diagnoses, treatment plans, and referrals. “Many of the subspecialty practices within the physician organization even have full-time staff members dedicated to referral processing,” they wrote.

On the revenue side, the study found that nearly 13% of billed charges for non-Medicare claims were denied on initial submission, and that 81% of these eventually are paid after appeals.

Non-Medicare payers ultimately deny more claims than Medicare does, usually because the physician's office has missed the filing limit date because of the initial rejection, the study found. If these legitimate claims had been paid, they would have been worth $6 million for the physician organization studied.

In addition, 29% of current professional billing staff effort is spent on processing and appealing claim denials that eventually are paid, the authors said.

The federal health reform legislation approved in March directs health plans to implement uniform standards for electronic health information exchange by 2013, but “will not address the larger problems of excessive, different, and changing requirements imposed on the exchange of all health information, including billing information.

“Thus, administrative complexity is likely to remain high and is likely to be a high-value 'target' for finding savings in ongoing incremental reforms.”

The savings from reducing administrative complexity by implementing a single set of rules and a single claim form could translate into decreased health care costs in general, Ms. Blanchfield and her colleagues noted.

“An incremental move to one set of payment rules would yield significant dollar savings as well as work-life and productivity opportunities,” the researchers said. “Administrative simplification could still leave room for a diversity of insurance products and could promote innovation without relying on blunt and opaque administrative processes as a tool.”

Disclosures: Support for the study was provided by the Robert Wood Johnson Foundation and the Commonwealth Fund. The authors reported no financial conflicts of interest.

Implementing a single set of payment rules for multiple payers with a single universal claim form and standard set of rules potentially could save $7 billion per year nationwide in fees for physician and clinical services, according to a study at one institution.

Those changes also could save 4 hours of professional time per physician and 5 hours of practice support staff time each week, according to Bonnie B. Blanchfield, a senior research scientist at Massachusetts General Hospital, Boston, and her coauthors (Health Affairs 2010 April 29 [doi:10.1377/hlthaff.2009.0075

“The U.S. health care system has generated byzantine systems of rules and regulations regarding payment for medical services. The result has been a growing and costly bureaucracy, which, in the end, pulls resources from direct patient care,” wrote Ms. Blanchfield and her coauthors, who included other researchers and financial officers from Massachusetts General Hospital and Massachusetts General Physicians Organization in Boston.

The study authors analyzed what they called the “excessive administrative complexity burden” imposed on a large, urban-based, academic teaching hospital's physician organization that contracts with multiple payers, each with different payment requirements.

For 2006, the study found that the cost of excessive administrative complexity, including expenses and lost revenue, was nearly $45 million for this organization, or nearly 12% of net patient revenue. This represented $50,250 per physician.

Out of the total estimated administrative complexity burden, almost three-fourths was attributed to the time costs incurred by practicing physicians and their office staff in preparing paperwork and contacting payers about prescriptions, diagnoses, treatment plans, and referrals. “Many of the subspecialty practices within the physician organization even have full-time staff members dedicated to referral processing,” they wrote.

On the revenue side, the study found that nearly 13% of billed charges for non-Medicare claims were denied on initial submission, and that 81% of these eventually are paid after appeals.

Non-Medicare payers ultimately deny more claims than Medicare does, usually because the physician's office has missed the filing limit date because of the initial rejection, the study found. If these legitimate claims had been paid, they would have been worth $6 million for the physician organization studied.

In addition, 29% of current professional billing staff effort is spent on processing and appealing claim denials that eventually are paid, the authors said.

The federal health reform legislation approved in March directs health plans to implement uniform standards for electronic health information exchange by 2013, but “will not address the larger problems of excessive, different, and changing requirements imposed on the exchange of all health information, including billing information.

“Thus, administrative complexity is likely to remain high and is likely to be a high-value 'target' for finding savings in ongoing incremental reforms.”

The savings from reducing administrative complexity by implementing a single set of rules and a single claim form could translate into decreased health care costs in general, Ms. Blanchfield and her colleagues noted.

“An incremental move to one set of payment rules would yield significant dollar savings as well as work-life and productivity opportunities,” the researchers said. “Administrative simplification could still leave room for a diversity of insurance products and could promote innovation without relying on blunt and opaque administrative processes as a tool.”

Disclosures: Support for the study was provided by the Robert Wood Johnson Foundation and the Commonwealth Fund. The authors reported no financial conflicts of interest.