How to Improve Cost Efficiency and Administration in Healthcare

As patients, when we receive mail and open an EOB (Explanation of Benefits) coming from our current healthcare provider, we have to stop what we are doing, take a deep breath and focus. The most careful, read the EOB with a pencil in hand, then circle all the items that are indecipherable or that we believe are wrong charges.

It leaves us pondering… if it is complicated for the patients to understand and breakdown, how much time and resources were invested in the making of this EOB? Is that administrative cost part of “Your Responsibility is $xx”? How much does the provider spend on administrative costs?

The research we did on the JAMA Network (Journals of the American Medical Association) mentions the findings of scholars from Harvard and Duke on a study done between 2016 and 2017.  According to this study, the estimated costs of billing, which constitute a substantial portion of the administrative costs and insurance-related activities, in a large academic health care system, ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure, representing 3% to 25% of professional revenue.

Costs of billing and insurance-related activities ranged from 3% to 25% of professional revenue between 2016 and 2017.

Another insightful article on BMC Health Services Research Journals about administrative costs in healthcare in the U.S. explains that the billing and other Insurance related costs (BIR) in the United States healthcare system totaled approximately $471 billion in 2012.  That amount included physician practices, hospitals, other health services, supplies, private and public insurers as well.  The study concludes that with a better financial system annual cost savings could result in nearly 15% of health care spending.

In January 2018, The Atlantic published: “Health Care Just Became the U.S.´s Largest Employer” stating that the recent growth in health-care employment is stemming more from administrative jobs than physician jobs and that it’s not always clear that these workers improve health outcomes for patients.


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