The U.S. spends about three times as much on healthcare administration and insurance per capita as Canada. Brookings Institution economist Henry Aaron estimated in 2003 that the U.S. would save more than $213 billion annually in administration and insurance costs if it had a single-payer system similar to that nation’s.
In fact, the entire healthcare system is inflated with costly administrative tasks. According to the Institute of Medicine (IOM), the United States spends $361 billion annually on healthcare administration — double the treatment costs of heart disease and triple the cost of cancer. The IOM estimates half of these expenditures are unnecessary.
Aaron described the U.S. healthcare system as “an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”
Donald Berwick, former director of the Centers for Medicare and Medicaid Services, estimated that needless administrative complexity created $107 billion to $389 billion in wasteful health-system spending in 2011. He cited “government, accreditation agencies, payers and others (who) create inefficient and misguided rules. For example, payers may fail to standardize forms, thereby consuming limited physician time in needlessly complex billing procedures.”
For example, Johns Hopkins Health System in Baltimore deals with about 700 different health plans, employers and other payers. Each payer has an annually negotiated rate for each service. Each also has different payment cycles and eligibility rules that must be tracked. The sheer complexity creates its own redundancies in several Johns Hopkins departments, which the organization calculated to be more than $40 million annually.
According to a study by a University of Massachusetts professor, a single-payer system would save the U.S. $1.8 trillion over a decade—including $592 billion in 2014 alone. Those savings would stem from eliminating the administrative burden of the current system and using the government’s bargaining power to drive down the cost of pharmaceuticals.
According to a 2008 study, 59 percent of U.S. physicians support a single-payer system. That is no doubt a measure of the enormous frustration physicians feel toward the nation’s insurance bureaucracy. In a 2011 survey of physicians who said they were “moderately to severely stressed or burned out on an average day,” the leading cause cited was the administrative demands of the job.
The AMA has been leading an effort to cut in half the number of medical claims paid incorrectly by large insurers.
The percentage of claims incorrectly processed by health plans fell for the third straight year, to about 7 percent, in 2013, according to the AMA’s sixth National Health Insurer Report Card. That compares with a 2011 rate of more than 19 percent. The AMA estimated that more than $43 billion could have been saved if commercial insurers had paid all claims correctly since 2010.
The AMA created an Administrative Burden Index to rank insurers based on unnecessary costs. The index rates commercial plans using a “star rating” based on delayed remittance, prior authorization requirements, claim edits and claim denials.
According to its fifth annual National Health Insurer Report Card, error rates for private health insurers on paid medical claims dropped from 19.3 percent in 2011 to 9.5 percent in 2012. This improvement resulted in $8 billion in health system savings, because of the reduction in unnecessary administrative work to reconcile errors. While dramatic improvements were made in 2013, the commercial health-insurance industry still paid the wrong amount for nearly 1 out of 14 medical claims.
According to a 2010 American Medical Association (AMA) survey, a typical physician office spends 20 hours a week on insurance administrative tasks. It found that more than 2 out of 3 physicians typically wait several days for pre-authorization for medications and 1 out of 10 wait more than a week. A 2009 Health Affairs study found that interactions with insurance companies cost U.S. physicians $23.2 billion to $31 billion a year.
The average physician spends nearly three weeks per year dealing with health plans. In addition, 23 weeks of nursing staff time and 44 weeks of clerical staff time are spent on insurance claims.
Physicians spend 45 percent of their workday outside the exam room, much of it devoted to documentation and follow-up. Every minute a physician spends outside direct patient care costs the average practice $4 to $6 in lost revenue.
With the widespread use of electronic health records (EHR), Health Affairs researchers estimated that at least half of a physician’s time during a patient visit is spent on low-value clerical work.
Insurance companies have been employing tactics reminiscent of managed care in the 1990s, according to The Wall Street Journal. They subtly are erecting more barriers to care through tighter networks and by requiring more referrals and authorizations prior to care.
In 2012, the AMA found a 23 percent increase over 2011 in claims that reflected an insurer pre-authorization review—increasing the total to 4.7 percent of claims. The AMA estimated that prior authorization policies added $728 million in administrative costs in 2012.
Doctors must follow strict health-plan guidelines or they will not be reimbursed. State and federal health-insurance programs continue to squeeze the rates they pay physicians. Many practices lose money when they treat Medicaid and Medicare patients.
Physicians have to hustle to cover their costs. Laurie Green, a San Francisco obstetrician and gynecologist, told the Journal, “I live my life in seven-minute intervals.” She estimated that she needed to earn $70 every 15 minutes to cover her office overhead.
Physicians’ workdays generally are brutal. A Philadelphia practice kept track of what its physicians did in a day’s time. The average doctor saw 18 patients, wrote 12 prescriptions, reviewed 14 consultation reports from specialists, studied 11 X-rays or other imaging reports, and wrote or answered 17 emails.
Of the time physicians spend outside of office visits, about one-third was spent on activities that saved an average of five visits a day, such as telephone calls and email communication with patients. The good news is that these activities reduce health-care costs, save time for patients and improve care coordination. The bad news for physicians is that these activities usually are not reimbursed.
Primary care, especially, is larded with unpaid work. An Archives of Internal Medicine study found that a typical general internist’s day included 70 laboratory tests, images and consultations; writing or signing 31 prescriptions; responding to seven messages related to patient care; and reviewing, editing and signing 17 electronic health records. This work is largely invisible and off the clock. Such administrative tasks add to an already crushing workload and can hasten physician burnout.
According to a 2013 physician survey by Medscape, nearly 40 percent reported at least one symptom of burnout, such as emotional exhaustion and a diminished sense of accomplishment. The top two reasons were “too many bureaucratic tasks” and “spending too many hours at work.”
Many health systems unwittingly are pushing more work onto the physician because they fear violating institutional or federal compliance issues. In some cases, only the physician can turn on the computer, reconcile a patient’s medications, record the history, enter orders for tests, compose the after-visit summary and complete the billing invoice—tasks that could be done by other staff members.
More than 3 out of 4 physicians believe insurers demand excessive pre-authorization for tests, procedures and medications, according to an AMA survey. More than 1 out of 3 have a rejection rate of 20 percent for first-time pre-authorization on tests and procedures, and more than half of physicians have a 20 percent rejection rate on prescriptions. About half of physicians have difficulty obtaining pre-authorization from insurance plans. About 2 out of 3 typically wait several days for permission. About the same proportion report difficulty in determining which tests, procedures and medications require pre-authorization.
This kind of workflow leads to low physician satisfaction. Nearly 1 out of 3 primary-care physicians say they intend to leave their practices within two years. The irony is that most physicians find interacting with patients outside of reimbursed office visits satisfying, and this kind of activity clearly enriches the primary-care environment. Unfortunately, no one is footing the bill for it.
Providers are attempting to push back against administrative burdens by becoming more efficient in other areas. Two process-improvement methodologies, such as Lean and Six Sigma, have migrated from other industries into health care.
The above is an excerpt from his new book So Long, Marcus Welby, M.D.: How Today’s Health Care Is Suffocating Independent Physicians—and How Some Changed to Thrive. D Healthcare Daily founding editor Steve Jacob draws on dozens of interviews and more than 500 published sources to cover these issues and describe how the landscape is changing for doctors.