Why are we still talking about administrative waste?

Nov 30, 2021 | Blog

Are we STILL talking about administrative waste in the American healthcare system? In a word, yes. Why? There are at least 760 billion “reasons” (dollars) annually. According to the JAMA, the United States wastes almost a quarter of its healthcare spending, somewhere between $760 billion and $935 billion, including an estimated $265.6 billion on administrative complexity.

The U.S. spends more on healthcare than any other country but realizes worse outcomes than most. According to a Commonwealth Fund study from 2019, despite spending 16.9 percent of our GDP on healthcare, the U.S. ranked last among 11 industrialized countries on health case system performance measures. Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom all do better when it comes to leading long, healthy, and productive lives. 

We’ve all heard the adage, the best defense is a good offense. In the game of football, that means keeping the ball away from the other team to prevent them from scoring. That may be an admirable strategy on the gridiron, but it can be devastating in healthcare. 

In our game of healthcare administration, it’s payers versus providers and patient data is the football. We punt the data to the other team but work hard to keep them from holding on to it for too long. The goal is control, but it’s the patient that loses. It’s time to pick a different strategy, one built on trust and centered on the good of the patient. 

What is administrative complexity?

Examples of administrative complexity are many and varied, from having to fill out forms in duplicate, rekeying existing data into a system, or managing data via fax transmissions. Most often, administrative complexity is part of billing and insurance-related (BIR) processes. These processes attempt to answer questions like:

  • Is this patient eligible for this service?
  • Can we verify the exact benefits?
  • Does this service need prior authorization?
  • Is this provider credentialled?
  • Is this provider part of the right network?

Some estimate that nearly half of all BIR costs are for activities that are unnecessary or duplicative. Remember the football game? To further complicate things, the referees are so nervous that one of the teams is planning on cheating (upcoding) that they keep enacting new rules. This, in turn, leads to the players looking for new creative options to “win” the game.

Why does the system work so poorly?

At its most basic level, the system is broken, and all this money is being spent on workarounds that require human intervention. The multiple, often redundant, connection points increase costs, delay care, and create personal and organizational friction. Most of the organizations involved can’t communicate directly as they have their own unique data structures and no way to share the data, even if they wanted to. (And some don’t. That proprietary data is a key business asset.) 

And, of course, there is the fax. You know, technology that died out everywhere else in the 1990s. Other industries have figured out how to electronically share data securely without losing control of prime business assets. The healthcare industry is still sending faxes. Why?

The answer is deceptively simple. Remove barriers to data sharing with an inclusive network. Connect each participant and gives access to permissioned, updated data. 

Going back to our football analogy: Until we play like a team, we’ll never be able to claim victory over this mess that is the U.S. healthcare system.