Waste within our very costly health care system is a subject of intense interest—and indignation. A special communication in JAMA by Shrank et al1on waste in the US health care system has been viewed over 100 000 times since it was published in October 2019, and over 750 authors have cited the 2012 JAMA article on eliminating waste by Berwick and Hackbarth.2 Both pieces provide evidence that roughly one-quarter of US health care spending (a figure that approaches $1 trillion) might be considered waste and broke down the estimated total into 6 categories of potential sources of waste (failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity).
Shrank et al add to the literature both by conducting a thorough literature review to pull together an updated estimate of the extent of waste and by estimating the portion of the identified waste that could be eliminated through specific interventions. They project that savings from interventions to reduce waste could range from $191 billion to $282 billion, representing a potential 25% reduction in the total cost of waste.
These projections do not, however, include savings from reduced administrative complexity, because their review did not turn up studies that demonstrated savings through reduced administrative complexity. Their review did include 2 articles that quantified waste due to administrative complexity.3,4
In addition, related work in JAMA includes that by Tseng et al,5 who examined the administrative costs associated with physician billing and insurance-related activities. Tseng et al found that costs of billing and insurance activities alone represented 3% to 25% of professional revenue when looking across services ranging from primary care visits to inpatient procedures. Soberingly, their study considered a period after the administrative simplification measures of the Patient Protection and Affordable Care Act (Section 1104) put into place standards for electronic interactions between providers and plans designed to reduce such costs. While those standards have helped the vast majority of claims submissions and eligibility queries to become electronic, prior authorizations and requests for clinical documentation remain largely manual—frustrating health care professionals and administrators and perpetuating large bureaucracies within insurers and health care organizations.
Given that administrative complexity was the single largest category of waste, with an estimated total annual cost of $265.6 billion, the lack of studies revealing ways to reduce waste through reducing administrative complexity is problematic. So too is the lack of a clear path forward on reducing administrative waste. Payment reform may remove the need for some types of administrative processes by placing more decision-making authority in the hands of those delivering care. Still, our health care system is so fragmented that we need renewed policy attention on how to standardize and streamline interactions between parties. In doing so, we can free up time and money for other, better, purposes.
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Buntin M. Administrative Simplification—The Holy Grail of Reducing Waste? JAMA Health Forum. 2020;1(2):e200232. doi:10.1001/jamahealthforum.2020.0232