US healthcare prices reflect huge administrative costs: 6 statistics

The complexity and high costs of treating U.S. patients is well known, but administrative costs also play a large role in healthcare financing. While these costs may be less obvious than patient care-related expenses, they are high, reports The New York Times.

Here are six statistics on administrative costs, as cited by the Times:

1. A study published in The New England Journal of Medicine examined data from 1999 to project administrative costs of health insurers, employers' health benefit programs, hospitals, practitioners' offices, nursing homes and home care agencies. The study found administration accounted for 31 percent of healthcare spending in the U.S., compared with 16.7 percent of healthcare spending in Canada.  According to the Times, the same estimates today would mean administrative costs in the U.S. account for $5,700 of the about $19,000 on average that this nation's workers and their employers spend on family coverage annually.

2. A more recent study published in Health Affairs examined data from 2010 and 2011 to determine how administrative costs of U.S. hospitals compared with hospital administrative costs in Canada, England, Scotland, Wales, France, Germany and the Netherlands. It found that 25.3 percent of total U.S. hospital costs went toward administrative expenses. The U.S. had the highest hospital administrative costs, followed by the Netherlands (19.8 percent) and England (15.5 percent). Scotland and Canada had the lowest hospital administrative costs.

3. At U.S. medical groups, 0.67 nonclinical full-time equivalent staff are working on billing and insurance functions for each full-time equivalent physician, according to an estimate published in Health Affairs in 2009. 

4. Another Health Affairs study of physicians and physician practice administrators found physicians spend three hours per week interacting with health plans. Additionally, the study showed medical support staff spend 19 hours per week per physician on such interactions, while interactions take up 36 hours of administrators' time per week, reports the Times. When combined, the publication states, the time costs $68,000 more annually per physician (in 2006).

5. A study published this year in JAMA analyzed administrative costs associated with billing and insurance-related activities at an academic healthcare system. The study found the estimated costs of such activities were as low as $20 for a primary care visit and as high as $215 for an inpatient surgical procedure. These costs represented 3 percent to 25 percent of professional revenue. According to the Times, Kevin Schulman, MD, a co-author of the study and a professor of medicine at Durham, N.C.-based Duke University, attributed the high administrative costs to being "functions of the system's complexity."

6. Collecting payments from patients also contributes to administrative costs, particularly as patients take on greater financial responsibility for their care. A study using 2015 data from Athenahealth showed that 93.8 percent of patient balances of $35 or less were paid within 12 months. However, only 66.7 percent of patient obligations of more than $200 were paid within a year. 

Read the full Times report here.


More articles on healthcare finance:
Chicago hospital needs $3M infusion to avoid closure
CHS closes Missouri hospital; physicians put their money on the line to expand services   
CMS releases proposed physician payment rule for 2019: 6 things to know

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