Billing Costs, Complexities for Physicians Called 'Absurd'

Kerry Dooley Young

April 03, 2018

New research gives hard numbers to show the challenges physicians in the United States face in billing, particularly to Medicaid. A paper published Monday pegs the annual cost of challenged revenue from all payers at as much as $54 billion.

The study, which is published in Health Affairs, examined the rates of claim denials for private insurers, Medicare, and Medicaid for doctors working in five specialties: cardiology, internal and family medicine, obstetrics and gynecology, orthopedics, and pediatrics. Compared with Medicare or private insurance, Medicaid appeared to be about two to three times as difficult for doctors to bill in terms of claims denials, the authors found. But an insurer-run Medicaid managed care program had somewhat better results than the traditional fee-for-service form of the program.

"These results are dramatic and striking," said Joshua Gottlieb, the study's first author and an associate professor at the Vancouver School of Economics at the University of British Columbia, Canada, in a statement. "Conventional wisdom held that it should be more challenging for doctors to bill private insurers. Yet, when it comes to Medicaid, our results show the opposite."

The researchers said they found a mean claims denial rate of 22% for traditional fee-for-service Medicaid, 10% for insurer-run Medicaid, 3% for fee-for-service Medicare, and 4% for both insurer-run Medicare Advantage and private insurance plans.

David Cutler, PhD, a Harvard University professor who has published influential work on the administrative costs of healthcare, reviewed the paper by Gottlieb and colleagues at the request of Medscape Medical News. In an emailed statement he described the paper as "fascinating and quite important."

"I think we can say that the amount of administrative cost they discover across the board is absurd to allow to continue," Cutler wrote in the email.

Medicaid Challenges

The Gottlieb paper is part of a growing body of work examining the costs of medical billing. In February, JAMA published a study that estimated costs of billing and insurance-related activities in an academic health system ranging from $20 for a primary care visit to $215 for an inpatient surgical procedure.

Gottlieb and his colleagues said they used a collection of 44.5 million claims from 37.2 million visits for their research. They put forth an estimate of $54 billion in annual challenged revenue, which they said was "near the high end" of previous estimates.

"If the share challenged were reduced to the minimum share that we observed in the data, the total challenged amount would be $11 billion lower," the authors said.

Gottlieb, who also is a faculty research fellow at the National Bureau of Economic Research, Cambridge, Massachusetts, wrote the paper with Adam Hale Shapiro, PhD, a research advisor at the Federal Reserve Bank of San Francisco, California, and Abe Dunn, PhD, an assistant chief economist in the Office of the Chief Economist, Bureau of Economic Analysis, Department of Commerce, Washington, DC.

Barbie Hays, the coding and compliance strategist for the American Academy of Family Physicians, said her long experience with medical billing makes her doubt a conclusion that the researchers suggested in the paper. She reviewed the paper at the request of Medscape Medical News. The three economists noted that Medicare and private insurer claims included more service lines than Medicaid claims did, which suggested more complex needs of those patients than those covered by Medicaid.

Hays said many medical practices may simply give up on seeking full reimbursement through Medicaid, even though patients covered by the state-federal program often have some of the most complex health needs.

"Medicaid just flat out doesn't pay for certain things," Hays told Medscape Medical News. "So why submit it?"

Some Improvements

Gottlieb and colleagues did note signs of improvement in billing, with insurer-run Medicaid's share of challenged payments declining from 26.2% in 2013 to 20.0% in 2015; its denial rate fell from 17.1% to 8.9%. There was a more "modest" decline in private insurance's denial rates, from 5.6% to 3.9%, the researchers said. Denial rates in Medicare Advantage fell from 4.2% to 3.0%, while the rates for fee-for-service Medicare stayed essentially flat over the study period, the authors said.

Jeff M. Myers, president and chief executive of the trade group Medicaid Health Plans of America, which represents commercial and nonprofit insurers, also reviewed the findings of Gottlieb and colleagues. In a statement to Medscape Medical News, he said the "real story" is that the insurer-managed approach cuts the challenge rate and the denial rate. 

"That's a big difference, but there's still more work to do," Myers told Medscape Medical News. "The program could benefit from standardizing claims forms at the state level, which is something Medicaid plans are working on with the states."

Gottlieb had the support of the Social Sciences and Humanities Research Council of Canada Grant and the Becker-Friedman Institute for Economics at the University of Chicago.  He was a visiting scholar at the Federal Reserve Bank of San Francisco and was a visiting assistant professor at the Stanford Institute for Economic Policy Research while conducting this research.                                       

Health Aff. Published online April 2, 2018. Abstract

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