American Medical Practices Have Substantial Costs Dealing With Insurance Companies Compared To Canadian Practices

A report in Health Affairs shows how the high cost of dealing with American insurance companies and other third party payers greatly increases the overhead costs of American physicians compared to doctors in Ontario. Following is the abstract:

Physician practices, especially the small practices with just one or two physicians that are common in the United States, incur substantial costs in time and labor interacting with multiple insurance plans about claims, coverage, and billing for patient care and prescription drugs. We surveyed physicians and administrators in the province of Ontario, Canada, about time spent interacting with payers and compared the results with a national companion survey in the United States. We estimated physician practices in Ontario spent $22,205 per physician per year interacting with Canada’s single-payer agency—just 27 percent of the $82,975 per physician per year spent in the United States. US nursing staff, including medical assistants, spent 20.6 hours per physician per week interacting with health plans—nearly ten times that of their Ontario counterparts. If US physicians had administrative costs similar to those of Ontario physicians, the total savings would be approximately $27.6 billion per year. The results support the opinion shared by many US health care leaders interviewed for this study that interactions between physician practices and health plans could be performed much more efficiently.

Conservatives often use the cost of malpractice insurance to explain the higher health care costs in this country, but the cost of malpractice insurance is t rival compared to the cost of health care billing. Comparisons of physician reimbursement in this country to that in other countries must need to take into the account the need for American physicians to have at least one full time employee, and often more to handle tasks such as obtaining HMO authorizations. In an American medical practice the biller is often the highest paid employee, greatly adding to overhead costs. While large practices might gain from economies of scale, they also have a larger number of  insurance claims to deal with which  requires multiple employees. The addition of drug coverage for Medicare patients which is provided by multiple companies with different formularies also adds tremendously to office overhead due to time spent obtaining authorization for prescriptions.

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