the average American physician spends 3.8 hours a week—the equivalent of more than 3 workweeks a year—on interactions with payers (Casalino et al., 2009). He estimates that Canada spends between $15 and $32 billion less on BIR activities compared to the United States because of greater administrative standardization.

James L. Heffernan from the Massachusetts General Physicians Organization highlights how other economic sectors, such as industrial manufacturers, commit significantly less resources to administration compared to the healthcare sector. Comparing the administrative costs of a single professional billing office to that of Medicare, he surmises that standardizing administrative complexity could save $26 billion for physician and clinical services’ billing operations along with 4 hours of professional time per physician per week and 5 hours of practice support staff time per week. He therefore concludes that a single, transparent set of payment rules in a multipayer healthcare system would potentially reduce the burden common in a provider’s billing office.

Concluding this session, Andrew L. Naugle of Milliman explores administrative costs for payers, focusing on the commercial market. He estimates that, if commercial insurers could all adopt the best-practice level of administrative expenses being no more than approximately 7.6 percent of fully insured commercial premiums, up to a $23 billion savings opportunity exists for the commercial market in total administrative expense reduction. As these estimates applied data across the entire commercial marketplace, Naugle cautions that variation in savings could occur across specific individual payers as they each will be variously impacted by their respective marketplace and organizational characteristics. Outlining opportunities to capitalize on these savings, he discusses possible policy options, including the elimination of manual transactions between payers and providers; simplifying the sales process; maximizing self-service capabilities and adoption; and standardizing payer and provider interaction processes and rules.

EXCESS BILLING AND INSURANCE-RELATED ADMINISTRATIVE COSTS


James G. Kahn, M.D., M.P.H.

University of California-San Francisco


There are very substantial administrative costs in the U.S. healthcare system, making up, by one estimate, nearly one-third of all spending (Woolhandler et al., 2003). A major portion of these costs are BIR activities undertaken to fulfill the requirements of getting paid, from contracting through collections. Most BIR activities occur at the provider level, with a smaller amount at the insurer level. BIR activities thus reflect the trans-



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