Who knew the cost of medical billing was such a significant factor of the high cost of health care?
A new report in the Journal of the American Medical Association spells out in dollars and cents just how much it costs to manage bills for health care. The Los Angeles Times reports that, according to the analysis, the cost of collecting payments for just one primary-care physician at a large academic medical center runs more than $99,000 a year.
Are you shocked yet? The study's researchers, from Duke University and Harvard Business School, reconstructed the whole life cycle of a medical bill to calculate exactly how much the process of billing costs. Beginning with the making of an appointment by a patient and ending when the health system banks the payment for treatment, researchers subjected five types of what they termed "patient encounters" to analysis.
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To understand every step in the process, the research team conducted 27 interviews with people involved at various points in the billing. They also surveyed 34 doctors to get a grasp on billing-related activities, such as submitting prior authorization requests to insurers. Once they had the whole billing process down, they used salary information from the medical center to determine how much each step cost to execute, then added in overhead costs such as office equipment and utility bills.
They found that:
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It costs $20.49 to get paid for a typical primary-care visit, and takes 13 minutes of processing time
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A typical emergency room trip costs $61.54 and takes 32 minutes of processing time
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A typical hospital stay costs $124.26, taking a surprising 73 minutes of processing time
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A typical outpatient surgical procedure costs t $170.40 to bill and 75 minutes to process
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The big kahuna was for a hospitalization that required surgery, incurring $215.10 in billing and a 100 minutes of processing time
The study also found that for most health care providers, billing costs are probably not only higher but maybe much higher—since the medical center in the study actually created its own division to handle billing and thus gains from economies of scale in a centralized system that employs the equivalent of 1,500 full-time workers.
The study's authors wrote that their calculations didn't even include such expenses as the cost of negotiating prices with insurance companies, the cost of training doctors to handle billing-related tasks and the cost of making sure that every potentially reimbursable service is added to the bill. Nor did they try to figure out how much it costs insurers to pay these bills—which could have run the total tally much higher, since, according to some other studies, the bill-related costs of payers are even higher than the bill-related costs of doctors and hospitals.
Dr. Vivian S. Lee, a radiologist at the University of Utah, and Bonnie Blanchfield, a senior scientist and former CPA at Brigham and Women's Hospital in Boston, are quoted saying in an editorial that accompanied the study, "The unnecessarily complex, fragmented, and inefficient system of billing, coding, and claims negotiations in the US health care system employs enough people to populate small nations."
They point out that outside the health care industry, it could keep about 100 full-time workers busy collecting on $1 billion worth of bills. But in the medical field, it takes "an astounding 770 full-time equivalents" to collect the same amount of money.
They write, "The process of moving money from payer to hospitals and physicians in the United States consumes an estimated $500 billion per year."
And then there's the stress, they add—the very high psychological costs of dealing with medical bills. They write that the stress caused by the billing system is detrimental to patients, and, according to the report, "even doctors are mystified by their own families' medical bills."
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