December 2020, Volume XXXIV, Number 9
Breaking down what’s breaking down
ur nation boasts one of the most innovative and sophisticated health systems in the world. The administrative infrastructure required to support this system has led to a bloat in costs, with diminishing returns. We have the most expensive healthcare system in the world, yet without commensurate outcomes. The U.S. life expectancy at birth ranks 34th among other developed nations.
According to a report from the Commonwealth Fund, in 2018, the U.S. spent 16.9 percent of gross domestic product (GDP) on health care, nearly twice as much as the average OECD country. The American Medical Association reports that healthcare spending has reached $3.6 trillion in recent years and could nearly double within the next decade. The reality is that innovation is expensive, but is how we are doing it efficient? A study done by Definitive Healthcare ranks Minnesota no. 19 in the nation by the average cost per procedure, largely burdened by the administrative overload that is not mitigated by an economy of scale.
Discussions about healthcare reform, streamlining our systems, creating a single-party payer, and many other means to simplify access to care are constant. All the while the administrative overload of our health systems continues to increase. Most health care administrators are driven by compassion and desire to help people, but quickly find themselves lost in the minutiae of rote tasks that seem worlds away from patient care. This overload primarily comes in the form of indirect processes and paperwork, usually required by regulatory agencies and insurance companies, not driven by administrator’s desire to control a hospital, clinic or health system. The added layers of administrative duties continue to drive job growth, but not necessarily wages. A writer for the Harvard Business Review estimated that over half of costs of healthcare are wages for workers, while productivity has historically been worsening. While most people envision hospitals being run by doctors and nurses, and maybe a few administrators behind the scenes, the opposite may be true. More than 60% of labor is non-clinical, and those jobs are fragmented across organizations, payer systems and delivery models.
Nearly 95% of job growth in healthcare is in administrative jobs.
Patients are likely to experience most of their interactions with administrative staff who are supporting the care delivery processes. This will range from medical receptionists, schedulers, patient accounts staff and more. While some of these models can help create more efficiencies for physicians, most often the processes that administrative staff support are driven by a response to external forces opposed to an improvement in patient care. These outside forces include such things as changes in regulations, increased compliance expectations, revenue cycle requirements, technology and more.
Analyzing Non-Clinical Support
The Medical Group Management Association (MGMA) was founded in 1947 to help identify and promote best-practices in clinic management. The MGMA currently has more than 55,000 members and their advocacy and resources have been core to the functioning of many medical practices. Only a generation ago the concept of a clinic administrator was seen as a threat to the fidelity of patient care but today nearly 95% of job growth in healthcare is in administrative jobs.
Despite administrative efforts to create efficiencies, health care delivery is fragmented and there are increasing numbers of layers of work. The result is a system that is not well-engineered for our patients in terms of caring for their whole self, throughout their needed cycle of care and conditions. The main issues shown in epidemiological data that contribute to the rising costs of U.S. healthcare stem from our aging population, obesity, and the management of chronic diseases. Americans visit their doctors less often and are not as diligent about preventative measures such as lifestyle habits and regular screenings.
The reality is that in order to support one physician, there is an ever-increasing requirement of additional indirect duties that need to be performed by administrators. In some cases, these requirements even limit how much the physician can do (such as scheduling appointments, ordering labs and more). There are also increasing needs to support back-end operations such as supply-chain management and facilities maintenance. To help curb some of these costs, most clinic and hospital systems are members of group purchasing organizations (GPOs) designed to get greater discounts when ordering in bulk, through exclusive agreements. Discounts can be offered up front and savings can also be realized through confusing “share-back” programs. Oftentimes these GPOs are owned and managed by larger health systems as a separate business. While they are designed to save costs and create efficiencies, participation requires fees, sometimes exclusivity, and even then they require close administrative monitoring. It is not uncommon for members of the same GPO to receive different pricing and perks due to the constantly shifting and archaic way they are designed.
Administrative burden can largely be attributed to the following areas:
Our health systems utilize expensive technologies such as MRIs and specialized procedures more often than our peers in other countries. In addition to medical device technology, our systems are incredibly reliant on expensive electronic health information and practice management systems. Expenses to implement an electronic health record (EHR) systems can easily reach into the millions for a single hospital, and even into the billions for large multi-hospital systems. The indirect costs and administrative burden beyond implementation is staggering. This includes training, security, maintenance, upgrades and more. By 2014 the federal investment into the Health Information Technology for Economic and Clinical Health (HITECH) Act had already reached $25 billion. The EHR industry now generates over $16 billion a year and offers providers a baffling range of over 700 products. The vision of easy and secure data-sharing between systems and interoperability remains elusive for most providers. EHRs are also the most prominent contributor to provider burnout. Many practice management systems aim to assist in meeting compliance standards, but the inevitable need for ongoing integration and development is surprisingly complicated and in many cases even cost-prohibitive. This means practices often compromise on true efficiency and quality process, for the sake of affordability. Therefore, the impact of changes in standards elsewhere in healthcare can create a dependence on technology, and subsequent costs of development.
Billing and Insurance Related (BIR)
This includes things like prior authorizations, claims submission and payment processing. While the Affordable Care Act (ACA) has helped extend insurance to millions more Americans, many are now experiencing the pains of being underinsured. Even for those who have insurance, there are high-deductible plans, copays, co-insurance, confusing networks – all of which have increased the financial burden and stress for patients. This has had the same impact on health systems who are responsible for checking benefits, gaining tedious authorizations, submitting, processing and reprocessing claims. It is estimated that nearly 1 in 5 claims need to be reprocessed. According to a 2019 McKinsey & Company report, the U.S. could reduce administrative spending by 30 percent by automating and streamlining BIR processes.
Compliance with HIPAA requires incredible costs in technology and staffing.
The revenue cycle process in healthcare has become increasingly more complicated and prone to errors that can leave guarantors with unnecessary financial responsibilities, and leave providers going unpaid entirely. Health systems must employ and train specialists to deal with all of these disparities within the revenue cycle including managing complex software with rules-engines that vary by payer, ensuring ongoing authorizations for hospital services, and keeping up to date on frequent regulatory changes.
One of the most popularized examples of overload in this area are the compliance requirements of the Health Insurance Portability and Accountability Act (HIPAA). For the most part, people misunderstand the fundamental purpose of HIPAA – which is to help make the exchange of private health information easy and safe to help in the delivery of high-quality care, while mitigating fraud and abuse. In reality, an immense amount of time and energy of both providers and administrators goes into managing consents, disclosures, releases, and security. Most people have HIPAA backwards as this formidable law results in significant administrative burden and the threat of penalties. Ironically, Title II of HIPAA contains the Administrative Simplification provisions which are largely aimed at increasing the efficiency of the health care system by creating standards for the use and dissemination of health care information. In practice, compliance with HIPAA requires incredible costs in technology and staffing.
Accreditation and Compliance
Almost all major health systems work with an accrediting organization like The Joint Commission, National Committee for Quality Assurance, or DNV GL Healthcare. These organizations have CMS deeming authority which means earning their seal of approval also subsumes the CMS Conditions of Participation, and most other insurance companies. Surveys can be exhaustive and have direct costs associated with participating in their programs, paying for staff travel, and even for ongoing consultation. The indirect costs far exceed the survey itself with hospital teams that support and implement the accreditation standards, educate staff, perform mock audits and more. While in general receiving formal accreditation fundamentally aligns a health system with top standards, many areas of compliance seem overly bureaucratic or redundant, and in some cases even unnecessary. A major complaint from many systems is the authority given to the individual surveyors to interpret standards, which may feel different between surveys. A health systems preparedness will likely still require visits and audits from other insurance companies and local officials, such as the department of health, fire marshal, and city officials. Systems that are larger and with multiple locations require complex training programs led by a safety officer and often a team focused on compliance and performance improvement.
An example of administrative overload in this area is the expensive burden of the various and often overlapping audits that are required. Audits are usually associated with accounting and even medical records, however, there is often an even greater administrative overload in regulatory requirements in auditing other functions such as billing and coding, pharmacy and medication logs, medical equipment, server security and networking permission and more. Each of these are critical functions and deserve astute attention, but often auditing requirements are redundant, or in some cases irrelevant to a particular setting, yet still mandatory. Hospitals dedicate entire departments and software applications to maintaining compliance in these areas, with little interoperability between the systems as the auditing checklists differ greatly.
The U.S. health care system continues to evolve and is a world leader in many areas – but the increasingly disproportionate amount of effort spent on administrative tasks that don’t correspond to an increase in quality or outcomes needs to change. Administrative overload is one of the expensive aspects of our health care system, with no noticeable gain or benefit. The results are more expensive care, increased provider burnout and in some cases a worse patient experience. In the most damaging cases, the layers of administrative requirements create increased potential for adverse patient events.
We need to determine the right balance of administrative services that support the triple aim, without creating redundancy, frustration, and unwieldy costs. There needs to be the same level for accountability and focus on quality in administrative processes as there is for patient care. Health care workers, whether administrative or direct care providers, are motivated to heal and help others. The shift of the regulatory focus to processes and paperwork within healthcare is detracting from quality care initiatives. Until we can get administration functions under better control and concentrate more on what really matters in health care, costs will continue to increase as we compromise on actual quality.
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