Keep it simple

January 10, 2011

The cost of inefficient healthcare claims processes, payment, and reconciliation is estimated to be between $21 billion and $210 billion, eating up to 10% to 14% of physician practice revenue, according to the American Medical Association.

Key Points

The cost of inefficient healthcare claims processes, payment, and reconciliation is estimated to be between $21 billion and $210 billion, eating up 10% to 14% of physician practice revenue, according to the American Medical Association (AMA).

A recent study by a team of researchers at Massachusetts General Hospital illuminates the frustration of the current medical billing system.

After analyzing the billing system of a physician's group affiliated with a large urban academic teaching hospital, the researchers discovered that 12.6% of claims are initially rejected. With considerable staff time and effort, 81% of these claims eventually are paid.

Administrative simplification provisions in the Patient Protection and Affordable Care Act seek to create uniformity of standards for several types of electronic health information transactions and mandate the creation of specific operating rules. Currently, claims can be submitted 400 different ways.

The secretary of the U.S. Department of Health and Human Services has until January 1, 2012, to solicit input on electronic standardization of enrolling healthcare providers and transparency and consistency in claims processing.

COSTLY PROCESSES

"Each health insurer uses a different set of guidelines for processing and paying medical claims," says AMA President Cecil B. Wilson, MD. "This variability requires physicians to maintain a costly claims management system for each insurer, placing a substantial administrative burden on physicians that adds a huge, unnecessary cost to our healthcare system."

The American Academy of Family Physicians (AAFP) also sees administrative simplification as "imperative" to the future of healthcare. The AAFP estimates that simplifying administrative tasks could save the healthcare system $300 billion annually.

The group advocates several measures to simplify administrative processes, including electronic health records, eligibility verification and benefits, health identification card standards, credentialing, real-time claims adjudication, healthcare contracting, electronic payments and statements, prior authorizations, and e-prescribing.

AAFP President Roland A. Goertz, MD, MBA, FAAFP, says the organization also supports a redesign of healthcare processes to provide a blended payment methodology, wherein physicians receive incentives based on how care is coordinated and transitioned.

"There is a lack of incentives built into payment systems to utilize all the modern tools to improve the process of care," Goertz says.