When the University of Pittsburgh School of Medicine and Humana Health Care acknowledges that one out of every 4 dollars spent on healthcare is wasted, they don’t mean it’s being spent of junkets and million-dollar toilet seats. What they mean is the lion share of money spent on healthcare is not being spent anything that benefits patients. Wasteful means the money is being used to pay for unnecessary and/or excessive costs associated with regulatory compliance and practice and/or hospital administration expenses. Wasteful means that the burden of approvals and preapprovals imposed by the insurance company is so great that almost one out of every two dollars that comes in a hospital’s door is spent on administrative and regulatory costs.
This study found that each year, between $760 billion to $935 billion spent on healthcare is wasted. Complex requirements imposed on providers by insurance companies and the government waste approximately one-third of this money.
It is certainly true that insurance companies make filing and collecting claims extremely difficult and most of their requirements are unnecessary and expensive. It is also true that the High Tech Act and other regulations make delivering healthcare more expensive. These laws have given Cerner, Epic, and other companies that sell electronic medical record systems (“EMRs”) an effective monopoly. These companies use their power to charge exorbitant prices. One year’s bill from EMR company can easily cost a hospital system, in a single year, half a billion dollars. The cost of upgrading systems is less than the cost of replacement, so competition is limited. All that money wasted means that there is significantly less to pay for patient care.
Ask yourself why? Why, when someone is experiencing heart failure and they need a valve replacement to fix their heart, does this procedure need an insurance company’s pre-approval before the operation can be performed? Isn’t it evident on its face why this procedure is needed? And then, why can insurance companies wait 30 to 90 days before making a decision about whether or not they are going to pay for that valve replacement? If they say no, which they often do, the burden is on the doctor and the patient to appeal. Doctors often call every day, appeal each denial, and, hopefully, get their approval before the patient dies.
In this environment, it shouldn’t be surprising that for every hour doctors spend with patients, they spend two additional hours on administrative tasks.* Doctors don’t get paid for fighting insurance companies to get their patient’s essential care. If employed doctors don’t see their quota of patients, between 6 to 8 per hour, they get penalized. Self-employed doctors only get paid what they bill for services rendered. This means that pay rates for doctors are often less than the nurses they hire.
And then it gets worse.
We just made hospitals spend millions of dollars, not on patient care, but in the name of price transparency. The truth is the prices posted under these regulations are generally full retail, not what insurance companies or patients typically pay. They also do not include additional costs associated with the procedure price quoted. Typically, when you have surgery, you pay the hospital a fee for the procedure. This fee covers the cost of the use of the surgical theatre. Your hospital stay, if needed, surgeon, anesthesiologist, meds, etc., etc., are billed separately. The price you see doesn’t reflect these extra costs. With bundling and negotiated rates, the price paid is generally much lower. If your procedure is more complex than a typical surgery or you have complications, your bill could be more than the posted price. You can’t know what the extras are that you may be billed for, and/or you don’t know if your cost will be part of a fixed price bundle, and/or you don’t know how much is negotiable. Posted prices cannot be used as a comparative benchmark. Waste, waste, waste!!
In the end, what we are seeing is that politician’s lack of comprehension about how the process work and insurance company’s needs to limit payments result in escalating and ever-increasing administrative costs which means declining money for patient care.