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How Much Health Plan Requirements Cost Physicians

The largest and most detailed national survey of physician practices about their costs of dealing with health plans found that they spend $31 billion a year on it. According to the study, which was published in Health Affairs, physicians spend about three hours a week interacting with insurers; clinical and administrative staff devote much more time to it. Nurses bestow an average of 3.8 hours per physician per day on health plan work, and clerical staff invest 7.2 hours per physician per day, or 35.9 hours per week.

Primary-care physicians and doctors in small practices spend more time handling health plans than do specialists and those in larger groups, according to the study. Physicians have to take more time to deal with drug formularies than with any other interaction, while nurses spend the most time on obtaining authorizations of drugs, tests, and procedures. Other categories include billing and collection, credentialing, contracting, and quality data submission, which is a tiny percentage of the cost.

Perhaps the most eye-opening finding of the study is that dealing with health plans costs the average practice $68,274 per physician per year. Primary-care practices spend $64,859, or nearly one third of the income (including benefits) of the average primary-care physician.

Moreover, long after managed care was supposedly forced into retreat, the costs of dealing with health plans are still increasing, according to the respondents. Forty-one percent said that the costs had increased a lot in the previous two years; 36 percent said they had grown to some degree.

The authors note that some of the work that practices have to do is justified by the plans' efforts to contain the costs of those who pay for care. But physicians say that, at least with regard to preauthorization of brand-name drugs, the insurers often second-guess doctors' clinical expertise and their knowledge of their patients. So perhaps this is a case of being penny-wise and pound-foolish.

The Medical Group Management Association (MGMA) has seized on this study to propose some federal legislation that, it says, would reduce the administrative burden on physician practices. First, it would have the government create national health plan identification numbers, similar to the national provider identifiers that have already been implemented. This change would save up to $8.8 billion over 10 years, MGMA says.

Second, the association wants the Department of Health and Human Services to publish a final rule for electronic claims attachments, which has been lost in bureaucratic limbo for the past four years. MGMA points out that making this addition to the HIPAA transaction set would help both providers and health plans, saving as much as $9.4 billion over the next decade.

Finally, MGMA wants Congress to require the healthcare industry to move to a standardized, machine-readable patient identification card. This is interesting, because MGMA's previous efforts to promote this ID card have relied on the voluntary efforts of physicians, health plans, and software vendors. MGMA estimates that this move could potentially save $22.2 billion over 10 years.

Here's the kicker: If all of MGMA's proposals were adopted and saved as much as it predicts, physician administrative costs would drop by only $4 billion a year. That's just 13 percent of the total that physicians spend on health plan interactions, according to the Health Affairs paper. Clearly, piecemeal legislative changes will not solve this problem, although they could soften its impact.

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