A single (payer) step to reduce U.S. physician overhead by $60,000

By Dante Morra, Sean Nicholson, Wendy Levinson, David N. Gans, Terry Hammons and Lawrence P. Casalino
Health Affairs, August 2011

Physician practices, especially the small practices with just one or two physicians that are common in the United States, incur substantial costs in time and labor interacting with multiple insurance plans about claims, coverage, and billing for patient care and prescription drugs. We surveyed physicians and administrators in the province of Ontario, Canada, about time spent interacting with payers and compared the results with a national companion survey in the United States. We estimated physician practices in Ontario spent $22,205 per physician per year interacting with Canada’s single-payer agency — just 27 percent of the $82,975 per physician per year spent in the United States. US nursing staff, including medical assistants, spent 20.6 hours per physician per week interacting with health plans — nearly ten times that of their Ontario counterparts. If US physicians had administrative costs similar to those of Ontario physicians, the total savings would be approximately $27.6 billion per year. The results support the opinion shared by many US health care leaders interviewed for this study that interactions between physician practices and health plans could be performed much more efficiently.

The price of inefficiencies is not only the cost measured in this study. When these inefficiencies result in frequent interruptions in the work of physicians and their staff, they are likely to interfere with patient care. Everyone — health plans, physicians and their staffs, and patients — will be better off if inefficiencies in transactions between physicians and health plans can be reduced.

http://content.healthaffairs.org/content/early/2011/08/03/hlthaff.2010.0893

Comment: 

By Don McCanne, MD

The U.S. spends over $60,000 more per physician per year than does Canada on the in-practice administrative costs of interacting with payers – four times as much in the U.S. as in the Canadian single payer system. That does not include the administrative costs of the U.S. private health insurers which will be 15 to 20 percent of premiums paid to plans in the exchanges being established by the Affordable Care Act.

A Health Affairs press release today stated, “Although the United States is not currently moving as a country toward a single-payer system, researchers offer ways to reduce administrative costs, including standardizing transactions as much as possible and conducting them electronically rather than by mail, fax, and phone.”

Unfortunately, the proposed use of standardized transactions conducted electronically hardly scratches the surface of this problem. Leaving in place a multitude of private and public plans with multiple benefit variations designed for the health care marketplace, with varying provider networks, and ever-changing patient eligibility can only perpetuate these administrative excesses.

What many in the policy community seem to forget is that it is not only the recovery of this administrative waste that would be of benefit, but we would all also benefit by the removal of the intrusive interference of the private insurers, the efficiencies of global budgeting and price negotiation, the assurance that everyone would be covered for life, benefits would be comprehensive, and financial barriers to care would be eliminated. Econometric models and the experience of other nations have demonstrated that we could have all of this without spending more than we already do.

Health Affairs and the sponsors of this study – The Commonwealth Fund and The Robert Wood Johnson Foundation – should not limit their recommendations to standardizing electronic transmissions. Instead of dismissing single payer with the passive observation that we are “not currently moving as a country toward a single-payer system,” they should be in the forefront of calling for a truly serious, in-depth look at the single payer model.

Instead of meekly submitting to the fact that we are hostages of the conservative revolution, we should break out and storm our centers of democracy, that is, if we still have a democracy.