Billing Costs Consume 14.5% of Primary Care Visit Revenue

Marcia Frellick

February 20, 2018

Even in a large academic center with a certified electronic health record (EHR) system, billing costs make up a significant percentage of revenue and vary widely by type of visit, a new analysis shows.

Using a time-based cost analysis, Phillip Tseng, MEd, from Duke University School of Medicine in Durham, North Carolina, and colleagues, found that estimated costs of billing and insurance-related activities in an academic health system ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure.

In the case of primary care, it takes $99,581 in billing and insurance-related work per year per primary care physician (PCP) just to get paid, assuming 4860 visits annually. The authors note that primary care billing costs in the United States have long been shown to be disproportionately high. One study found that these costs are four times higher than in Canada, for instance.

Findings of the current study were published online today in JAMA. Following is the breakdown for five kinds of visits.

Table. Estimated Per-Visit Processing Time and Costs for Billing and Insurance-Related Activities

Type of Visit Processing Time (min) Total Billing and Insurance-Related Costs ($)
Primary care 13 20.49
Emergency department 32 61.54
General inpatient stay 73 24.26
Ambulatory surgical procedure 75 70.40
Inpatient surgical procedure 100 215.10

 

"These findings suggest that significant investments in certified health information technology have not reduced high billing costs in the United States," the authors emphasize.

"Although the EHR system can automatically generate bills for clinical visits, these systems require the time of high-cost physicians to perform coding and documentation activities that are unrelated to clinical services."

The study offers a rare look at how individual components of administrative costs break down. Most previous studies have looked at them in the aggregate and without widespread adoption of EHRs, the authors note. The previous studies found that physician billing costs were 10% to 14% of revenue.

The current study used a state-of-the-art cost-tracing approach and included physician and health system administrator interviews. It found the percentages ranged from  14.5% for PCP revenue to 25.3% of emergency department visit revenue,

Billing Costs Are Likely Higher Than This Study Shows

Despite these high proportions, they estimates likely underestimate true costs, Vivian S. Lee, MD, PhD, MBA, from the Radiology Department at the University of Utah in Salt Lake City and the Institute for Healthcare Improvement in Cambridge, Massachusetts, and Bonnie B. Blanchfield, CPA, ScD, senior scientist with the Center for Clinical Innovation at Brigham and Women's Hospital in Boston, write in an accompanying editorial.  

For one thing, in the academic center studied, the hospital and physicians share a billing system, which adds unusual efficiency and avoids duplication. In most health systems those records are separate. Also, while annual operating costs of the EHR were included in these estimates, capital costs of the system were not.

This study shows that despite the presumption that EHRs would streamline coding and reduce documentation requirements, "if anything, administrative time needed for billing has increased for physicians and other staff as EHRs have become more widespread," Lee and Blanchfield write.

The findings are also consistent with those in other studies that show how a fragmented health system creates much more waste than other industries.

"While non–health care industries typically might employ 100 full-time-equivalents to collect payment for $1 billion in services, health care employs an astounding 770 full-time-equivalents per $1 billion of physician services," the editorialists note.

Among improvements they say may help alleviate the costs are computer decision support tools that could automatically justify a test or drug based on evidence, which could simplify the prior authorization process. Automated coding could improve accuracy and reduce administrative costs further.

Market consolidation that brings insurers and health systems (including hospitals and physicians) under the same umbrella could simplify transactions, the editorialists write.

They add, "[S]tandardized global payment models could radically simplify item-by-item claims and medical bills."

They point to the US credit card system, which has one set of payment rules that allow a variety of bank credit cards to compete on such things as interest rates and loyalty programs.

"Health care could do the same," they suggest.

Coauthors report personal fees from Avant-garde Health; grants, personal fees, and/or other support from Amylin, Janssen Research & Development, Merck & Co, Anthelio, Banner Health, Cytokinetics, Genentech, McKesson, NeuroCog Trials, Nutrition Science Initiative, Sanofi-Aventis, American Hospital Association, Cancer Consultants Inc, Faculty Connection, Physician Education Leadership Initiative, Bivarus Inc, Grid Therapeutics, Cardinal Analytx, and Rolling Hill Ventures. Lee reports serving on the board of directors for Merrimack Pharmaceuticals.

JAMA. Published online February 20, 2018. Abstract, Editorial

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