When you think of a hospital, images of high-tech equipment or operating rooms come to mind. What you probably don't imagine are the roomfuls of people who deal with getting paid. There are "football fields of people" according to Ellen Zane, former chief executive of Tufts Medical Center.
"Each one of those people multiplied times as many health care facilities as there are in this country, have salaries and benefits, so it is a very expensive piece of overhead," says Zane.
Indeed, it is expensive. The Institute of Medicine says that more than $360 billion a year is spent on billing and insurance-related costs. In other words, on overhead. That’s a lot of overhead — much more than any other country — and most of it is a result of the U.S.’s complex private insurance system.
The billing odyssey
Anne Belknap, director of patient financial services at Tufts Medical Center, knows a thing or two about overhead.
"Last year we billed about just under 300 different insurance companies," says Belknap, who oversees the people who deal with insurance companies.
You might think 300 is a lot of payers, but multiply that by all of the different plans each insurance company has. Each of those plans has its own coverage rules, and those rules can change at any time.
"That’s probably our biggest challenge," says Belknap. "The complexity of keeping up with all of the insurances, all the different rules that can change deep in their website and we have to figure out ... or we won’t get paid."
Belknap says while some insurance companies do email notifications when they've changed a coverage rule on one of their products, most do not. "For the most part we’re responsible for going out and looking for these changes," she says.
Each month, Belknap and her staff generate 120,000 standard health insurance claims. Each form has 33 boxes to fill out, and some of those boxes have subcategories. It comes to about 4 million boxes a month.
It’s enough to make you dizzy. But we’re not done yet. If everything is done right, the hospital could be paid within 5 days. It's when a claim is denied that the real odyssey begins.
"There is a certain art form to it when you get denials," says Belknap. "You have to work back and forth with medical records and the front end to figure out why did this get denied, how can we get this claim paid."
All this back-and-forth requires a lot of people. Belknap has 150 people on her staff. She says 80 percent of them work on claims that didn’t get paid the first time they were filed. Sixty of those people are in accounts receivable. They're the ones who follow up with the insurance companies and, well, fight. But she also has analysts who look at each denied claim and try to figure out why it wasn’t paid. As if this wasn’t complex enough, the analysts then have to generate reports to see if there are any systems that can be put in place to prevent those denials.
Belknap says if the system were simplified, if the insurance companies all had to play by the same rules, her department would be half its size — or less.
A systemic problem
This billing odyssey is not unique to Tufts. "It’s just impenetrable to understand," says economist Nancy Turnbull, associate dean of Harvard School of Public Health.
Turnbull has no shortage of words to describe the U.S.’s health care billing system. "Complex. Fragmented. Confusing," she says. She even calls it "byzantine."
"Sometimes I stop and think about all the wonderful things we could be doing with the resources that we spend on administration in the health care system," says Turnbull. "What a waste it is."
Turnbull says at the end of the day, it's just bureaucracy. "It doesn’t produce any better health, any better access to medical care," she says.
Addressing the issue
The Affordable Care Act addresses the issue. The law’s administrative simplification provision sets deadlines and targets for all private payers to standardize operating rules for all health system transactions.
"We supported that," says Robert Zirkelbach, the spokesman for AHIP, America’s Health Insurance Plans, a national trade association representing the health insurance industry. Zirkelbach says standardization is a necessary building block to be able to create a more efficient 21st century health care system.
"I think there’s pretty widespread belief that simplifying health care administration would save money for all stakeholders across the board," he says. "It would save money for providers, it would save money for consumers and it would save money for health plans as well."
Whatever bite is taken out of administrative costs, consumers hope they’ll see a reduction in their health insurance premiums.
