Why Medical Billing Costs are up in the USA?


Studies show that medical billing costs in the US significantly exceeds those in similar countries, but researchers now know why: coding drives up US administrative spending.

Complexity in coding structure in the US are driving up medical costs in the US, making it one of the most expensive countries to get paid, according to a new study.

A published study in Health Affairs used microlevel time-driven activity-based costing measurements to compare the billing and insurance-related (BIR) costs at provider offices in the US and five other countries.

The countries included single-payer systems such as Canada, as well as multipayer systems where there are public and private payers that reimburse providers such as Germany and Australia. This also included sites in Singapore, which uses a government subsidized model to reimburse providers global budget payments, and the Netherlands, which has universal and compulsory multi-private-payer coverage.

The study corroborated what research has established: BIR costs in the US are much higher than the costs in other countries. In fact, BIR costs ranged from $6 in Canada to a high of $215 in the US for an inpatient surgical bill. That represents about 3.1 percent of the total professional revenue for the procedures in the US. Providers also spent about 100 minutes processing the claim.

Only the sites in Australia had comparable BIR costs. This country has a mix of publicly and privately funded payers, as well as universal coverage. BIR costs were less in Canada than in the other nations, while Germany, Singapore, and the Netherlands had comparable costs.

Higher costs in the US and Australia were attributed to higher coding costs, researchers found.

“We observed that high US costs are caused primarily by expensive and extensive coding activities, not higher wages paid to US personnel,” they wrote in the study.

For the moment, hospitals in Canada, Germany, Singapore, and the Netherlands has had much lower coding-related costs. It shows that the US could find savings by “simplifying and standardizing payment procedures.”

These countries may have vastly different ways of financing healthcare, but researchers noted a common thread with coding. Each country has its own national structures that standardize how payers reimburse providers. In example, providers in Canada, Germany, and the Netherlands have a standard list of charges, similar to Medicare’s diagnosis-related groups (DRGs). Contract terms for German and Dutch payers are the same for most billing codes, with a small amount of billing code prices determined through negotiations between payers and providers.

The US has different coding processes where each payer has its own forms and documentation requirements. This creates a significant burden on providers to translate clinical documentation into billable codes to be reimbursed.

Standardization in other countries helps providers spend less time coding or do not need coders to translate documentation into billable codes, researchers suggests. Singapore has an automated billing system to record and process its DRG codes based on ICD-10 codes and its list of charge codes.

“Little physician time is spent entering billing-related information into the EHR system, as charge codes are either generated automatically or entered manually by a lower-wage or nonclinical teammate,” researchers stated. “As a consequence, these countries’ billing systems either require fewer labor resources or require far less costly labor and physician time than the one in the US.”

It was also found that financial counseling may reduce overall BIR costs in the US.

In Germany and Singapore, providers offer patients financial counseling when doing other eligibility procedures. They have patient services teams meet with patients to go over expected charges and insurance coverage . Providers participating in the study said they believe financial counseling helped lowered downstream costs in the billing process although it took more time and money on the front end.

It suggests that stating prices prior to care delivery can commit providers to specific amounts, which could prevent recording and reworking the claim down the line.

“Confirming prices in advance of care might also commit providers to a specific amount, thereby preventing ex-post recoding that can inflate both BIR and payer costs. Financial counseling could prove valuable to US patients, who too frequently are surprised by the multiplicity and magnitude of the bills they receive, especially from out-of-network providers,” the study stated.

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