Healthcare | How Administrative Costs Bog Down The American System

Healthcare | How Administrative Costs Bog Down The American System

A recent Bloomberg article highlights a unique and rather large issue with the current U.S. healthcare system. This issue is the literal and unending amount of administrative staffing and its subsequent paper trail. In essence, the costs of administration, billing, settling payments are three times as much as in other affluent, developed countries.

Healthcare records

How Bad Is The Red Tape?

When most people think of the healthcare system, they imagine care providers from nurses to doctors to pharmacists, etc. Little do they know, the current healthcare is exponentially more than that. According to the Bloomberg article, For every $1 billion in revenue, the healthcare system employs the equivalent of 770 full-time people to settle the bills.

Generally, administrative costs involve procedures such as pushing a claim through different levels of the system, processing bills, answering patient phone calls and emails, chasing after unpaid bills and also, paying the large salaries of the administrators of insurers, marketing and executive hospital staff.

“Duke University Hospital has 900 hospital beds and 1,300 billing clerks. The typical Canadian hospital has a handful of billing clerks. Single-payer systems have fewer administrative needs.” David Cutler, PBS Newshour (link)

Here’s a stat: Administrative costs in the United States healthcare systems account for 25 percent of total hospital spending. These same costs in other countries account for 12 percent of spending in Canada, 16 percent in England, and 20 percent in the Netherlands.

Comparison of administrative spending

Image Source (link)

Can The Healthcare System Be Streamlined?

Experts in the field recommend standardization. This would involve standardizing billing practices along with updating and modernizing the computing systems of administration. Naturally, the transition to one unified standard in the American healthcare system would be daunting and will come with setbacks. But the end game would be a more efficient, more streamlined system that will pay off in years to come.

Standardization in healthcare has been visited before. The federal government proposed in 1996 (through the Health Insurance Portability and Accountability Act) preliminary standards for the electronic processing of claims, payments, and other bills. Unfortunately, it wasn’t enough as insurers needed to extract more information from patients. The Affordable Care Act of 2010 gave incentives to providers to adopt more advanced electronic records.

It may be some time until the entire system becomes standardized. There are certainly hurdles to that, starting with the insurance companies. Add to that the changing of the computing system and the importing records to this proposed standardized system could be difficult as well. Most of us will be deadlocked with this current system. This is where Eusoh can play a part in eliminating administrative costs all together. Hence, keeping expenses down for both healthcare providers and patients. By engaging and sharing costs with the crowd, the majority of people won’t have to feed the already top-heavy system.