AMA joins with business to cut administrative waste

A message to all physicians from AMA President Cecil B. Wilson, MD.

By Cecil B. Wilson, MDis an internist in private practice in Winter Park, Fla. He served as chair of the AMA Board of Trustees during 2006-07 and was AMA president during 2010-11. Posted March 7, 2011.

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Whenever any of us talk to a lawmaker about the Patient Protection and Affordable Care Act, we get the same message. As Joe Scarborough, a talk show host and a former congressman, put it during the annual AMA National Advocacy Conference in February, "It's not about ideology, it's about math."

Actually, the health system reform law is about ideology -- and the nation's responsibility to see that every American has access to health care when they need it.

But it is also very much about math. And we know that, too.

However, as physicians, we do not have all the answers for addressing these math problems or all the best ideas. And if we are going to improve on the math, we need help.

That is why the AMA has issued a challenge to the business community to partner with us to cut administrative waste in medicine.

The AMA has four key strategies to help us use our health care dollars more wisely. They are:

  • Reduce the burden of preventable disease.
  • Make the delivery of care more efficient.
  • Promote value-based decision-making at all levels.
  • Reduce nonclinical costs that don't contribute to patient care.

It is this last one -- reducing costs that do not contribute to patient care -- where we have reached out to business.

The administrative morass of today's system is not working well for anyone. It is complex, redundant, inefficient and costly for all of us -- and it is an area where we all share a great deal of frustration.

And it is expensive: Costs attributable to administrative waste systemwide are estimated at $200 billion a year. In a physician's office, administrative costs represent 10% to 14% of a physician's office's gross income.

The AMA has been a leading advocate for restructuring the system to eliminate administrative waste. We believe we can accomplish significant reductions in expenses by standardizing and streamlining the system. Ultimately, however, it is a bigger job than we can do alone, from inside medicine.

A root cause of the problem is a lack of standardization.

Every health insurance company has its own set of procedures and payment policies. This means that even if a health insurer provides a clear explanation of a physician's negotiated fee schedule -- which is all too frequently not the case -- the physician has no way to know how that fee schedule actually will be applied to specific services.

In many cases, insurers adopt varying policies and procedures for different employers who purchase their products or for whom they administer benefits.

This makes it nearly impossible for physician offices to track which procedures apply for a specific patient.

Any physician's office has to deal with a staggering amount of paperwork and phone calls before insurance companies will authorize coverage for services and medications for our patients.

Large amounts of time and money are spent to obtain payment for covered services that already have been provided.

The AMA is tackling this problem by actively promoting a health care administrative simplification campaign that promotes a uniform, automated, industrywide claims processing system for insurers, physicians and patients.

Electronic medical record systems promise to bring enormous value in this area.

Another step toward simpler and more transparent claims administration is the health reform law requirement that by Oct. 1, 2012, every health plan must use a unique identifier in health care transactions.

This will deal with physician offices' problem of having to spend hours on the phone trying to figure out which mental health carve-out company, or third-party administrator, or pharmacy benefit manager ultimately is responsible for a particular patient's insurance benefit.

The National Insurer Report Card, which the AMA began issuing in 2008, also is part of the effort toward administrative simplification, streamlining and transparency. These insurer report cards reflect health insurer performance in several key administrative areas, including the timeliness, transparency and accuracy of claims processing.

Each of these report cards represents millions of electronic transactions in hundreds of physicians' practices.

We have seen positive changes in the three year-to-year report cards issued at the June House of Delegates meeting since 2008 -- so we know change is possible.

For example, contracted fees were reported correctly up to a high of 87% in 2008 -- improved to a high of 94% in 2010.

A finding of the report cards that we cannot do anything about is the high percentage of claim denials that occur because patients do not know what their benefits are.

This is a case where better-educated medical consumers can save the system millions of dollars. But educating consumers about their benefits is something that employers and insurance companies must do -- not something physicians can do.

Another area where we would look to business for guidance is in determining how to ensure that those who administer health plans have accurate, up-to-date eligibility information about employees and their dependents -- as well as up-to-date benefits information.

The absence of this information generates huge costs for physicians and other health care providers who must track down the current information and resubmit claims.

Throughout the system, there are a wealth of opportunities for making changes that will save money. Those listed here are only a few of the wasteful administrative issues that physicians' offices, patients and insurance companies struggle with every day.

The AMA is organizing a work group that embraces the labor, business and employer community. Our goal is to identify areas of common interest where we can bend the curve of health care costs by improving efficiency and simplifying administrative procedures.

I will keep you apprised of our progress.

Cecil B. Wilson, MD is an internist in private practice in Winter Park, Fla. He served as chair of the AMA Board of Trustees during 2006-07 and was AMA president during 2010-11.

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