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Health plan requirements cost practices billions, with the per-doctor average near $70,000

Primary care physicians spent the greatest amount of time dealing with health plan administrative tasks.

By Emily Berry — Posted June 1, 2009

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Physicians know that the phone calls, faxes and e-mails sent between their practices and health plans take time. Researchers have determined how much time it takes and what it costs.

A study published online May 14 in Health Affairs estimates that practices' interactions with insurers cost $23.2 billion to $31 billion a year. The average physician spends 43 minutes per work day -- more than three hours a week -- dealing with health plan administrative requirements.

The time physicians, nurses and other practice staff spend interacting with insurers costs an average of $68,274 per physician per year.

The survey found that the average primary care physician in a solo or two-physician practice spends 4.3 hours per week dealing with plans, on everything from contracting to reporting quality data.

Primary care physicians spent significantly more time, on average, dealing with insurers than do specialists and surgeons. The average primary care physician, across all practice sizes, spent 3.5 hours on health plans' administrative requirements, while medical specialists spent an average of 2.6 hours, and surgical specialists spent 2.1 hours.

Ted Epperly, MD, president of the American Academy of Family Physicians, said the results confirmed what family doctors already knew. "The disproportionate share of this is borne by the primary care physicians -- we end up eating [the cost]."

How the numbers were crunched

The study was conducted by researchers affiliated with the Medical Group Management Assn., Weill Cornell Medical College in New York, University of Toronto and University of Chicago. It was based on surveys answered by 895 physicians and practice administrators, who estimated the time they and staff spent dealing with health plans' preauthorization requirements, formularies, claims and appeals.

The annual $31 billion cost was derived by multiplying the average time spent by the estimated number of physician practices in the U.S. and converting that to dollars, using physician and staff compensation data from the Dept. of Labor, MGMA and American Medical Association.

Calculating the total using the median cost per physician resulted in an estimated $23.2 billion annual cost. Researchers removed extreme outliers in calculating the mean but wrote that the mean was higher than the median because some physicians reported spending large amounts of time dealing with health plans.

The MGMA, in conjunction with the release of the study, made recommendations to address the problem. If implemented, the group estimates that their changes would save $40.4 billion over 10 years.

"Compared to changing physician practice patterns, it would be somewhat easier to change some of the administrative procedures," said MGMA President and CEO William F. Jessee, MD.

The MGMA recommends that:

  • Insurers adopt universal, standardized, swipe-card identification for patients, as recommended by the Workgroup for Electronic Data Interchange.
  • The Dept. of Health and Human Services issue regulations for electronic claims payment attachments. These rules already are required under the Health Insurance Portability and Accountability Act, but the department has yet to issue the regulations insurers should follow.
  • HHS issue a proposed rule for the national health plan identifier, a single number that could be used during the claims process to identify each plan. This also is required under HIPAA but was never implemented.

Physician leaders say the study's findings will prove to policymakers that payment procedures need to be simplified and standardized.

Last year the AMA launched its "Heal the Claims Process" campaign to address the cost of getting paid for care. According to one estimate the AMA cited, physicians spend as much as 14% of their revenue on efforts to get paid promptly and for the contracted amount.

As it launched the campaign along with a report card on each of the major insurers' administrative efficiency and accuracy, the AMA called for health plans to invest in making claims payments faster and more accurate. The AMA also has published guides for physicians to improve their own claims handling and to save time and money by submitting claims electronically.

Will changes come?

Dr. Epperly said he doesn't believe insurers will make changes and standardizations voluntarily, because speeding payments would rob them of the interest they make off the premiums they "float" while processing claims. "It's in their financial interest to delay this as long as possible. Until they are forced to do it, they won't do it."

But Robert Zirkelbach, spokesman for the trade group America's Health Insurance Plans, disagreed.

"Any industry has a strong incentive to serve their customers well," Zirkelbach said. "Our goal is to make the system more efficient to improve care for patients and to reduce health care costs."

He pointed to efforts to adopt real-time claims adjudication as evidence that health plans are looking to streamline administrative processes for physicians and patients. "There's an opportunity to achieve significant cost savings if we can make the health care system more efficient."

Asked what would be a reasonable amount of time for physicians to spend dealing with health plans, Dr. Jessee's response was: "less."

"It'll never be zero. There is some legitimate cost." But some of those billions of dollars are wasted, he said, and policymakers can use that as grounds to demand reform from insurers.

In the meantime, as more health plans implement and expand quality reporting and associated pay-for-performance programs, the demands on physicians will only rise, Dr. Jessee said.

"The potential is there for that to become a more expensive undertaking if the plans don't standardize what they ask physicians to report."

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ADDITIONAL INFORMATION

Practices pay a price for participating in health plans

The time a practice spends dealing with health plans' administrative requirements, and thus the costs involved, varies by specialty and size. Here are selected means for 2006, as reported by Health Affairs.

1-2 doctors3-9 doctors10+ doctorsWeighted mean
Primary care$72,675$63,611$57,480$64,859
Medical specialty$70,788$87,566$78,553$78,913
Surgical specialty$61,187$76,429$59,866$66,954

Source: "What Does It Cost Physician Practices To Interact With Health Insurance Plans?" Health Affairs, May 14 (link)

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Putting a price tag on time spent with insurers

Dealing with health plans' administrative requirements takes time, not only from physicians but also from nursing and office staff. Here is the mean annual value of hours spent in 2006, broken down by physician time and staff time in different sizes and types of practices.

1-2 doctors3-9 doctors10+ doctorsWeighted mean
Physician time
Primary care$16,864$12,858$11,118$13,691
Medical specialist$23,083$20,850$18,014$20,497
Surgical specialist$15,197$18,091$16,814$16,669
Nurse time
Primary care$16,079$25,142$25,618$22,254
Medical specialty$13,279$29,000$24,731$22,449
Surgical specialty$13,328$26,391$20,426$19,935
Clerical staff time
Primary care$31,666$21,833$17,918$23,980
Medical specialty$27,595$32,411$20,038$26,279
Surgical specialty$27,977$29,118$19,180$26,650

Note: time spent by senior administrators, lawyers and accountants is not included. Source: "What Does It Cost Physician Practices To Interact With Health Insurance Plans?" Health Affairs, May 14 (link)

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