Use of EHRs Does Not Reduce Administrative Costs

Comment: Researchers examined administrative costs associated with physician billing and insurance-related activities at an academic health care system. This paper investigated costs associated with physician billing activities. —Jennifer Villwock, MD

What are the administrative costs associated with billing and insurance-related activities at an academic healthcare system with a certified electronic health record system?

Bottom Line
The estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure, representing 3% to 25% of professional revenue.

Background: Administrative costs in the U.S. health care system are an important component of total healthcare spending, and a substantial proportion of these costs are attributable to billing and insurance-related activities.

Synopsis: The researchers examined and estimated the administrative costs associated with physician billing activities in a large academic healthcare system with a certified EHR system. Interviews were conducted with 27 health system administrators and 34 physicians in 2016 and 2017 to construct a process map charting the path of an insurance claim through the revenue cycle management process. These data were used to calculate the cost for each major billing and insurance-related activity and were aggregated to estimate the health system’s total cost of processing an insurance claim.

Estimated billing and insurance-related costs for five types of patient encounters: primary care visits, discharged emergency department visits, general medicine inpatient stays, ambulatory surgical procedures, and inpatient surgical procedures. Estimated processing time and total costs for billing and insurance-related activities were 13 minutes and $20.49 for a primary care visit, 32 minutes and $61.54 for a discharged emergency department visit, 73 minutes and $124.26 for a general inpatient stay, 75 minutes and $170.40 for an ambulatory surgical procedure, and 100 minutes and $215.10 for an inpatient surgical procedure.

Of these totals, time and costs for activities carried out by physicians were estimated at a median of three minutes or $6.36 for a primary care visit, 3 minutes or $10.97 for an emergency department visit, five minutes or $13.29 for a general inpatient stay, 15 minutes or $51.20 for an ambulatory surgical procedure, and 15 minutes or $51.20 for an inpatient surgical procedure. Of professional revenue, professional billing costs were estimated to represent 14.5% for primary care visits, 25.2% for emergency department visits, 8.0% for general medicine inpatient stays, 13.4% for ambulatory surgical procedures, and 3.1% for inpatient surgical procedures.

Citation: Tseng P, Kaplan RS, Richman BD, Shah MA, Schulman KA. Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA. 2018;319:619–697.