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Original Investigation
February 20, 2018

Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System

Author Affiliations
  • 1Duke University School of Medicine, Durham, North Carolina
  • 2Harvard Business School, Boston, Massachusetts
  • 3Duke University School of Law, Durham, North Carolina
  • 4Duke Clinical Research Institute and Department of Medicine, Durham, North Carolina
JAMA. 2018;319(7):691-697. doi:10.1001/jama.2017.19148
Key Points

Question  What are the administrative costs associated with billing and insurance-related activities at an academic health care system with a certified electronic health record system?

Findings  In a time-driven activity-based costing study of personnel and overhead costs in a large academic health care system, the estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure, representing 3% to 25% of professional revenue.

Meaning  In an academic health care system with a certified electronic health record system, the estimated costs of billing and insurance-related activities were substantial and varied depending on the type of clinical encounter.

Abstract

Importance  Administrative costs in the US health care system are an important component of total health care spending, and a substantial proportion of these costs are attributable to billing and insurance-related activities.

Objective  To examine and estimate the administrative costs associated with physician billing activities in a large academic health care system with a certified electronic health record system.

Design, Setting, and Participants  This study used time-driven activity-based costing. Interviews were conducted with 27 health system administrators and 34 physicians in 2016 and 2017 to construct a process map charting the path of an insurance claim through the revenue cycle management process. These data were used to calculate the cost for each major billing and insurance-related activity and were aggregated to estimate the health system’s total cost of processing an insurance claim.

Exposures  Estimated time required to perform billing and insurance-related activities, based on interviews with management personnel and physicians.

Main Outcomes and Measures  Estimated billing and insurance-related costs for 5 types of patient encounters: primary care visits, discharged emergency department visits, general medicine inpatient stays, ambulatory surgical procedures, and inpatient surgical procedures.

Results  Estimated processing time and total costs for billing and insurance-related activities were 13 minutes and $20.49 for a primary care visit, 32 minutes and $61.54 for a discharged emergency department visit, 73 minutes and $124.26 for a general inpatient stay, 75 minutes and $170.40 for an ambulatory surgical procedure, and 100 minutes and $215.10 for an inpatient surgical procedure. Of these totals, time and costs for activities carried out by physicians were estimated at a median of 3 minutes or $6.36 for a primary care visit, 3 minutes or $10.97 for an emergency department visit, 5 minutes or $13.29 for a general inpatient stay, 15 minutes or $51.20 for an ambulatory surgical procedure, and 15 minutes or $51.20 for an inpatient surgical procedure. Of professional revenue, professional billing costs were estimated to represent 14.5% for primary care visits, 25.2% for emergency department visits, 8.0% for general medicine inpatient stays, 13.4% for ambulatory surgical procedures, and 3.1% for inpatient surgical procedures.

Conclusions and Relevance  In a time-driven activity-based costing study in a large academic health care system with a certified electronic health record system, the estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure. Knowledge of how specific billing and insurance-related activities contribute to administrative costs may help inform policy solutions to reduce these expenses.

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