US Physician Practices Versus Canadians: Spending Nearly Four Times As Much Money Interacting With Payers

Headnote

ABSTRACT

Physician practices, especially the small practices with just one or two physicians that are common in the United States, incur substantial costs in time and labor interacting with multiple insurance plans about claims, coverage, and billing for patient care and prescription drugs. We surveyed physicians and administrators in the province of Ontario, Canada, about time spent interacting with payers and compared the results with a national companion survey in the United States. We estimated physician practices in Ontario spent $22,205 per physician per year interacting with Canada's single-payer agency-just 27 percent of the $82,975 per physician per year spent in the United States. US nursing staff, including medical assistants, spent 20.6 hours per physician per week interacting with health plans-nearly ten times that of their Ontario counterparts. If US physicians had administrative costs similar to those of Ontario physicians, the total savings would be approximately $27.6 billion per year. The results support the opinion shared by many US health care leaders interviewed for this study that interactions between physician practices and health plans could be performed much more efficiently.

Total health spending per capita in the United States, adjusted for differences in purchasing power, is 87 percent more than in Canada ($7,290 compared to $3,895 per year).1 Many factors contribute to the high cost of health care in the United States, but there is broad consensus that administrative costs in the health care system are high and could be reduced.2"4 Interactions between physician practices and health insurance plans are one prominent component of administrative costs.

We recently published the results of a survey of US physician practices that estimated the time spent by physicians, nurses, and office staff on interactions with health plans. The survey found that at least $31 billion is spent on these activities annually in the United States.5 These estimates are broadly consistent with the findings of other studies that used different methods.6-8

Physician practices in the United States must interact with many health plans in the US multipayer system. Moreover, interactions increase with plans' attempts to "manage care," such as requiring prior authorizations for many specialist, imaging, and hospital services. Each health plan offers many different insurance products to consumers, and each may have its own formulary (or list...