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

Abstract

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