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Consumers Upset By High Cost of Administration

MANAGED CARE April 2007. © MediMedia USA
News and Commentary

Consumers Upset By High Cost of Administration

MANAGED CARE April 2007. ©MediMedia USA

When it comes to health care administrations, there is a wide gap between what executives of hospitals and insurance companies believe it costs and what consumers believe.

Executives say that administration associated with health care claims and billing accounts for nearly 1 of 3 dollars that patients spend on health care. In contrast, more than three-quarters of U.S. consumers said they think health care administration should account for just 10 percent or less of total health care costs, with a majority indicating that they would be "highly upset" if those costs were as high as 30 percent.

The largest source of rising costs would appear to be inefficient claim processing, billing, and payment processing, with insurance executives reporting that they go back to hospitals two times, on average, to get all the information needed to pay a claim. Seventy-two percent of U.S. consumers agreed that administrative costs were significant. Additional findings include:

  • When asked how much could be saved annually if they had a more efficient claims, billing, and payment process, one third of hospital and health plan executives said their organizations could save at least $1 million a year.
  • Automated processes could significantly reduce claim processing time, according to insurance executives, with 63 percent reporting that customer satisfaction had improved as a result of implementing automation.

The survey also revealed the extent that health care cost-consciousness and price transparency are an emerging trend that affects consumers' attitudes.

"The demand for transparency will focus on administrative overhead costs that will ultimately root out inefficiencies," says Paula Fryland, executive vice president and manager of the national health care group of the PNC Financial Services Group. More than half of consumers said that knowing what hospitals and doctors charge for treatment and what insurers pay for services would influence where they get care. In addition, the majority of consumers (83 percent), hospitals (77 percent), and insurance executives (60 percent) responded that insurance companies should disclose what they pay for services.

The survey involved 200 hospital and insurance company executives and 1,000 consumers.

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