New U of T study compares health administration costs in Canada, U.S.

U.S. physician practices could save nearly $28 billion per year if they could bring costs associated with dealing with health insurers and payers more in line with Canadian physician practices, says a new University of Toronto study in the August issue of Health Affairs. Although Canada and the United States have very different health systems, the new study sheds light on how U.S. practices could streamline inefficiencies and reduce administrative costs to improve care and reduce burdens.

According to the study, U.S. physician practices spend $83,000 per doctor every year interacting with health insurers and other payers, compared to $22, 000 for Canadian physicians, who only deal with a single payer. On average, U.S. doctors spent 3.4 hours per week interacting with health plans while doctors in Ontario spent about 2.2hours. Nurses and medical assistants, spent 20.6 hours per physician per week on administrative duties compared to their Canadian counterparts, who only spent 2.5 hours.

“The major difference between the United States and Ontario is that non-physician staff members in the United States spend large amounts of time obtaining prior authorizations and on billing,” said Professor Dante Morra of medicine and his co-authors.

Morra and colleagues say high administrative costs in the United States are due to the large variety of payers that practices must deal with. Each has different plan requirements, insurance formularies, and rules for billing and claims submission, which impose huge burdens on practices. Conversely, Canadian physicians generally interact with a single payer that offers one product and are subject to fewer managed care requirements.

Although the United States is not moving toward a single payer system, researchers offer ways to reduce administrative costs, including standardizing transactions as much as possible and conducting them electronically rather than by mail, fax and phone. This would not only reduce costs but would reduce the so-called “hassle factor” of physician and staff interruptions for phone calls that interfere with patient care, say the authors. In addition, study authors cite Affordable Care Act changes like bundled payments, and the creation of accountable care organizations as potentially decreasing administrative burdens over the long term.