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US Physician Practices Spend 4 Times Canadian Practices

August 5, 2011

Gap ascribed to administrative costs of interacting with multiple payers

Physicians in the United States spend nearly four times as much dealing with health insurers and payers compared with doctors in Canada. Most of the difference stems from the fact that Canadian physicians deal with a single payer, in contrast to the multiple payers in the United States.

These findings are published in the August issue of the journal Health Affairs — the result of a research collaboration among Weill Cornell Medical College, Cornell University”“Ithaca, the University of Toronto, and the Medical Group Management Association.

Administrative costs are high in the United States due to the fact that different payers have different prior authorization requirements, pharmaceutical formularies, and rules for billing and claims payment, the researchers report. Conversely, physicians in Ontario (where the investigators conducted their survey of Canadian physician practices) generally interact with a single payer that offers one product and more standardized procedures for billing and payment, and that does not routinely require prior authorization of medical services for patients.

“The major difference between the United States and Ontario is that non-physician staff members — nurses, medical assistants and clerical staff — in the United States spend large amounts of time obtaining prior authorizations and on billing,” says lead author Dr. Dante Morra, medical director of the Centre for Innovation in Complex Care and assistant professor of medicine at the University of Toronto.

As a result, say the investigators, per capita health spending in the U.S. is 87 percent higher than in Canada — $7,290 vs. $3,895 annually. Administrative costs incurred by U.S. physicians and staff are estimated to be at least $82,975 per physician each year.

“If U.S. physician practices had administrative costs similar to those in Canada, the total savings for U.S. health spending would be about $27.6 billion per year,” says senior author Dr. Lawrence Casalino, chief of the Division of Outcomes and Effectiveness Research in the Department of Public Health at Weill Cornell Medical College.

“Many factors contribute to the high cost of health care in the United States, but there is broad consensus that administrative costs are high and could be reduced,”

Dr. Casalino continues. “Short of adopting a single-payer system, reducing these costs can be achieved by realizing efficiencies, such as by adopting standardized rules for transactions between physicians and health plans and communicating through electronic systems.”

The authors provide several specific recommendations, including standardizing transactions as much as possible and conducting them electronically rather than by mail, fax and phone. These measures would not only reduce costs but would also reduce the so-called “hassle factor” of physician and staff interruptions for phone calls that interfere with patient care, say the authors. In addition, the authors cite Affordable Care Act changes such as bundled payments, and the creation of accountable care organizations as potentially decreasing administrative burdens over the long term.

Additional findings from the study, “U.S. Physician Practices Spend Nearly Four Times as Much Money Interacting With Health Plans and Payers Than Do Their Canadian Counterparts”:

    * On average, U.S. doctors spent 3.4 hours per week interacting with health plans while doctors in Ontario spent about 2.2 hours. Nurses and medical assistants in the U.S. spend 20.6 hours per physician per week on administrative tasks related to health plans, nearly 10 times the time spent by those in Ontario.

    * U.S. clerical staff spend 53.1 hours per physician per week on administrative tasks related to insurance, compared with 15.9 hours in Ontario. Most of the difference comes from the time U.S. clerical staff spend on billing (45.5 hours) and obtaining prior authorizations (6.3 hours).

    * Senior administrators in the U.S. spend much more time per physician than their Canadian counterparts on overseeing claims and billing tasks: 163.2 hours a year in the U.S. compared with 24.6 hours a year in Ontario.

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