Stanford-Led Study Indicates Ways to Reduce US Healthcare Billing Costs | Information Center

“Germany and the Netherlands have competitive insurance markets with multiple private insurers, but they run systems with much lower administrative costs,” said Barak Richman, JD, PhD, lead author of the study and Professor of Law at Duke University and Senior Fellow at CERC. “It suggests they have lessons that we can easily apply in the United States.”

Besides coding, other cost-saving opportunities include eligibility, which refers to verifying insurance for the visit; submission, referring to the preparation of invoices; and rework, correct billing errors and resolve disputes between the payer and a supplier.

Schulman said the research also highlights the burden of an outdated US administrative system, a legacy of the paper-based system that was in place before the adoption of electronic health records. “What we’ve done in healthcare billing in the United States is take the analog process and digitize it, whereas other countries have created all-digital processes and optimized them, which has enabled to make huge savings,” he said. “Savings have been identified in the literature in the order of $250 billion per year, but are likely even greater.”

More possibilities to reduce costs

For some countries, savings also come from assigning tasks to workers in lower-skilled job categories. “What we are seeing is an overreliance on medical coding in the US system, requiring significant input from clinicians in the process. Other countries have no clinicians involved at all and have significantly limited the complexity of the coding process,” Schulman said.

Some countries, including Singapore, cut costs by offering pre-treatment financial counseling, in which a patient services team meets with patients to explain expected costs, what their insurance covers, and what their out-of-pocket will be. This reduces costs downstream of the invoicing process, primarily by reducing rework.

The researchers noted that other healthcare systems have their own unique trade-offs. But learning from successful processes in other countries, Schulman said, could lead to dramatic improvements in efficiency without requiring an overhaul of the entire US healthcare system.

The survey was a collaboration between professors from Stanford Medicine, Harvard Business School, Duke University, University of Toronto Rotman School of Management, Erasmus University Rotterdam in the Netherlands, GenisisCare in Australia and St. Andrews Hospital in Australia.

The study was funded by Stanford CERC and Harvard Business School.

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