Billing and insurance administrative activities costs reach $471B yearly

The administrative burden of billing and insurance-related activities is a significant one. In 2012, such activities cost the healthcare system approximately $471 billion, according to a study in BMC Health Services Research.

Researchers reviewed billing and insurance-related micro-costing studies across healthcare sectors to calculate total estimated costs in 2012. Billing and insurance-related activities include filing claims, obtaining prior authorizations and managed care administration.

Forty-nine percent of the $471 billion comes from private payers ($198 billion), 18 percent from settings providing other health services and supplies ($94 billion), 15 percent from hospitals ($74 billion), 13 percent from physician practices ($70 billion) and 5 percent from public insurers ($35 billion).

Researchers suggest 80 percent of this cost — $375 billion — is the result of the multi-payer system. "In the U.S. multi-payer system, insurers' coverage, billing and eligibility requirements often vary greatly, requiring providers to incur added administrative effort and cost," the researchers wrote.

Researchers suggest implementing a simplified financing system could save the healthcare industry $375 billion yearly in administrative costs.

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