Physicians Pay Steep Price to Contract With Health Plans
Annual Costs Estimated as High as $31 Billion
By Sheri Porter
6/2/2009
Physicians know all too well that dealing with the details required by health insurance plans takes time. Now, researchers have tallied up all those physician and staff hours spent on administrative tasks related to pharmaceutical formularies, prior authorizations, claims and billing, credentialing, and contracting, and they have assigned these services a hefty price tag. The researchers estimate the cost of such administrative tasks ranges from $23 billion to $31 billion annually.
According to the study, "What Does It Cost Physician Practices To Interact With Health Insurance Plans?" which was published online May 14 in Health Affairs, physicians spend an average of three hours a week -- or nearly three weeks a year -- on tasks related to patients' health insurance. Nurses spend about 19 hours per physician per week taking care of such tasks, and clerical staff members spend nearly 36 hours per week on the tasks.
The study authors put the numbers into perspective. "Our estimated mean $31 billion cost to physician practices of time spent on interactions with health plans is equal to 6.9 percent of all U.S. expenditures for physician and clinical services. It is six times the amount the federal government has spent annually on the Children's Health Insurance Program."
According to the study, the financial hit to primary care physicians -- who, the authors note, earn less than subspecialists -- is the greatest. Researchers estimate that yearly health plan administrative costs for a primary care physician add up to $47,707. That's nearly one-third of the average income (plus benefits) of a primary care physician.
The study was funded by the Robert Wood Johnson Foundation and the Commonwealth Fund.
Lead study author Lawrence Casalino, M.D., Ph.D., told AAFP News Now that he practiced primary care medicine for 20 years, and he understands why physicians are frustrated with time-consuming health plan details.
"From the physician practices' point of view, it's a nightmare," said Casalino, who is chief of the Division of Outcomes and Effectiveness Research at Weill Cornell Medical College in New York City.
However, Casalino acknowledged that health plans are always looking for a competitive edge, a better product and lower costs. "Plans get an advantage over other plans if they can help hold down costs," he said.
For instance, take those ever-changing pharmaceutical formularies. "That's annoying to physicians for sure, but there are potential benefits if health plans are negotiating good deals and getting lower prices," because that helps lower health care costs, said Casalino.
He even sees a possible positive side to those pesky code edits that each health plan handles differently. Code edits, if conducted effectively, could force a reduction in unnecessary or excessive health care services, he said.
The study authors put the numbers into perspective. "Our estimated mean $31 billion cost to physician practices of time spent on interactions with health plans is equal to 6.9 percent of all U.S. expenditures for physician and clinical services. It is six times the amount the federal government has spent annually on the Children's Health Insurance Program."
According to the study, the financial hit to primary care physicians -- who, the authors note, earn less than subspecialists -- is the greatest. Researchers estimate that yearly health plan administrative costs for a primary care physician add up to $47,707. That's nearly one-third of the average income (plus benefits) of a primary care physician.
The study was funded by the Robert Wood Johnson Foundation and the Commonwealth Fund.
Lead study author Lawrence Casalino, M.D., Ph.D., told AAFP News Now that he practiced primary care medicine for 20 years, and he understands why physicians are frustrated with time-consuming health plan details.
"From the physician practices' point of view, it's a nightmare," said Casalino, who is chief of the Division of Outcomes and Effectiveness Research at Weill Cornell Medical College in New York City.
However, Casalino acknowledged that health plans are always looking for a competitive edge, a better product and lower costs. "Plans get an advantage over other plans if they can help hold down costs," he said.
For instance, take those ever-changing pharmaceutical formularies. "That's annoying to physicians for sure, but there are potential benefits if health plans are negotiating good deals and getting lower prices," because that helps lower health care costs, said Casalino.
He even sees a possible positive side to those pesky code edits that each health plan handles differently. Code edits, if conducted effectively, could force a reduction in unnecessary or excessive health care services, he said.
Additional Study Findings
The researchers based their results on survey responses gathered from 1,310 physicians, including 730 primary care physicians and 580 other physician specialists. The authors asked survey participants how many hours they spent per week on specific health plan interactions and found that physicians spent more time dealing with formularies than on any other interaction.
Primary care physicians spent significantly more time with formularies -- at 1.7 hours a week -- than did subspecialists (1.2 hours weekly) or surgeons (0.7 hours weekly).
Additionally, the researchers found that primary care physicians spent 1.1 hours a week -- more time than other physicians -- securing prior authorizations for their patients.
"For primary care physicians, the problem is, of course, that you refer, but you don't get referred to," said Casalino. A good primary care practice always gets the necessary authorization for referral to a subspecialist and does so as a service to the patient, he added.
Casalino said his former practice paid a steep price for offering that service. He and his eight physician partners spent nearly $11,000 each for two employees to procure prior authorizations from health plans. "For me, that was about 10 percent of my income," said Casalino.
Interestingly, for all the talk of quality improvement in health care, the researchers reported that the average physician spent just two hours a year on gathering quality data for health plans or reviewing quality data generated by plans about the physician's practice.
Primary care physicians spent significantly more time with formularies -- at 1.7 hours a week -- than did subspecialists (1.2 hours weekly) or surgeons (0.7 hours weekly).
Additionally, the researchers found that primary care physicians spent 1.1 hours a week -- more time than other physicians -- securing prior authorizations for their patients.
"For primary care physicians, the problem is, of course, that you refer, but you don't get referred to," said Casalino. A good primary care practice always gets the necessary authorization for referral to a subspecialist and does so as a service to the patient, he added.
Casalino said his former practice paid a steep price for offering that service. He and his eight physician partners spent nearly $11,000 each for two employees to procure prior authorizations from health plans. "For me, that was about 10 percent of my income," said Casalino.
Interestingly, for all the talk of quality improvement in health care, the researchers reported that the average physician spent just two hours a year on gathering quality data for health plans or reviewing quality data generated by plans about the physician's practice.
Health Insurer Response
Casalino said that in discussions he's had with health plan executives, many admit to inefficiencies in their companies' procedures, but most insist they are streamlining the work they ask physicians do to.
Not so, said a strong majority of the physicians surveyed. In fact, slightly more than 80 percent of physicians and practice administrators said the costs of dealing with health plans had increased somewhat or increased a lot during the past two years.
Lewis Sandy, M.D., is the senior VP of clinical advancement for UnitedHealth Group. He said his company "strongly supports national standards that simplify administrative interaction between health care insurers and care providers."
Sandy is a member of the Healthcare Administrative Simplification Coalition, or HASC, an organization founded in 2005 by the AAFP, the American Health Information Management Association and the Medical Group Management Association to address the growing burden of administrative complexity.
Sandy pointed out that UnitedHealth Group was the first national carrier to issue machine-readable health care identification cards to all of its health plan members. In addition, he noted that UnitedHealthcare was the first and, to date, the only national payer to simplify physician credentialing through use of a multipayer portal dubbed the Universal Provider DataSource.
The portal is hosted by the Council for Affordable Quality Healthcare and currently is being used by more than 700,000 physicians and other health care providers.
Casalino concluded that the data compiled from the survey -- especially the eye-popping price tag -- should draw attention to the problems of high administrative costs as well as to the work of organizations such as HASC. On May 21, he presented the new research results at an Institute of Medicine workshop aimed at lowering health care costs.
Not so, said a strong majority of the physicians surveyed. In fact, slightly more than 80 percent of physicians and practice administrators said the costs of dealing with health plans had increased somewhat or increased a lot during the past two years.
Lewis Sandy, M.D., is the senior VP of clinical advancement for UnitedHealth Group. He said his company "strongly supports national standards that simplify administrative interaction between health care insurers and care providers."
Sandy is a member of the Healthcare Administrative Simplification Coalition, or HASC, an organization founded in 2005 by the AAFP, the American Health Information Management Association and the Medical Group Management Association to address the growing burden of administrative complexity.
Sandy pointed out that UnitedHealth Group was the first national carrier to issue machine-readable health care identification cards to all of its health plan members. In addition, he noted that UnitedHealthcare was the first and, to date, the only national payer to simplify physician credentialing through use of a multipayer portal dubbed the Universal Provider DataSource.
The portal is hosted by the Council for Affordable Quality Healthcare and currently is being used by more than 700,000 physicians and other health care providers.
Casalino concluded that the data compiled from the survey -- especially the eye-popping price tag -- should draw attention to the problems of high administrative costs as well as to the work of organizations such as HASC. On May 21, he presented the new research results at an Institute of Medicine workshop aimed at lowering health care costs.
