HASC Report: Reduce Pervasive Administrative Complexity in Health Care System

The United States could save billions of dollars in its cash-strapped health care system by cutting through the administrative red tape that entangles physicians, hospitals and patients every day, according to a new report released by the Healthcare Administrative Simplification Coalition, or HASC.

Founded in 2005 by the AAFP, the American Health Information Management Association and the Medical Group Management Association, or MGMA, HASC is a partnership of organizations committed to reducing the administrative costs and complexity of health care.

The coalition's report, "Bringing Better Value: Recommendations to Address the Costs and Causes of Administrative Complexity in the Nation's Healthcare System," (26-page PDF; About PDFs) says that about 25 percent of the nation's health care costs -- estimated at more than $2 trillion in 2007 -- go toward administrative functions, such as billing and payment tasks.

That's money being diverted away from hands-on patient care, according to MGMA President and CEO William Jessee, M.D.

"Every dollar spent on a convoluted, redundant or unnecessary administrative process is a dollar poorly spent," Jessee said in a July 20 news release announcing the report. "We spend more on health care than any nation in the world, but we're getting far less than full value for our investment, partly because of unnecessarily complex administrative processes."

"These wasted health care dollars could be much better spent on ensuring that all Americans have access to high-quality health care," said AAFP EVP Douglas Henley, M.D., in an interview with AAFP News Now. "If we don't work toward reducing administrative complexity in our health care system, we'll continue to waste both time and money."

In its report, the organization outlines recommendations for how physician practices, hospitals, insurance payers, benefits managers and others can

The report notes that the health care industry collects and verifies physicians' qualifications and practice history as part of the credentialing process at an annual cost of more than $7,600 in staff time for an average 10-physician practice.

However, more than 735,000 health care professionals currently are registered to use the Universal Provider Datasource, a tool launched by the Council for Affordable Quality Healthcare, or CAQH, that allows physicians and other health care professionals to electronically enter their credentialing information into a single, uniform online system.

More than 8,000 new users sign up for the free service every month, and HASC recommends that all health plans and hospitals that require credentialing use the tool to simplify the process.

Similarly, the lack of uniformity related to billing and payment processes undermines physicians' gross revenues. The report cites a recent Health Affairs study that estimates up to 14 percent of a physician's annual gross revenue goes toward claims-processing costs.

The HASC report commends CAQH's Committee on Operating Rules for Information Exchange, (47-page PDF; About PDFs) or CORE, for its work on developing operating rules for electronic data interchange to improve administrative efficiencies in health care. The coalition also recommends that health plans, clearinghouse and practice management systems voluntarily adopt CORE's operating rules. Current rules cover patient eligibility and benefit information; future additions likely will include guidance on claim status inquiries, prior authorizations and more.

According to the HASC report, inconsistencies in health insurers' patient identification cards result in a significant percentage of rejected claims. Cards vary in the type and amount of information they hold and are not always readable when scanned or photocopied.

Thus, the report recommends using standardized, machine-readable patient identification cards. For example, the Health Identification Card Implementation Guide (46-page PDF; About PDFs) was approved by the Workgroup for Electronic Data Interchange in 2007. According to the HASC report, several large health plans have adopted the guide.

The HASC report indicates that use of a standard patient identification card would

The coalition's report also points out that the prior authorization process is costly and time-consuming for physicians and insurers. In particular, authorizations for radiology and advanced imaging services and for pharmacy benefits create a significant administrative burden for physicians.

For example, use of radiology benefits is increasing, according to the report, which notes that Medicare spending for imaging services was nearly $14 billion in 2006. Similarly, pharmacy benefits also challenge physician practices because it takes time to verify patients' insurance benefits and sort through a multitude of formulary configurations. A 10-physician practice spends upwards of $137,000 each year on prior authorizations and pharmacy callbacks, says the HASC report.

The coalition supports, to the extent possible, standardization of prior authorization processes among health plans and pharmacy benefits plans and backs electronic prescribing national networks, such as Surescripts and other entities, that are working to achieve real-time, patient-specific formulary access.