Active steps to reduce administrative spending associated with financial transactions in US health care

Abstract

US health care administrative spending is approximately $1 trillion annually. A major operational area is the financial transactions ecosystem, which has approximately $200 billion in spending annually. Efficient financial transactions ecosystems from other industries and countries exhibit 2 features: immediate payment assurance and high use of automation throughout the process. The current system has an average transaction cost of $12 to $19 per claim across private payers and providers for more than 9 billion claims per year; each claim on average takes 4 to 6 weeks to process and pay. For simple claims, the transaction cost is $7 to $10 across private payers and providers; for complex claims, $35 to $40. Prior authorization on approximately 5000 codes has an average cost of $40 to $50 per submission for private payers and $20 to $30 for providers. Interventions aligned with a more efficient financial transactions ecosystem could reduce spending by $40 billion to $60 billion; approximately half is at the organizational level (scaling interventions being implemented by leading private payers and providers) and half at the industry level (adopting a centralized automated claims clearinghouse, standardizing medical policies for a subset of prior authorizations, and standardizing physician licensure for a national provider directory).