Research collaboration among Weill Cornell Medical College, Cornell University Ithaca, the University of Toronto, and the Medical Group Management Association, found physicians in the United States spend almost four times more than Canada, dealing with health insurers and payers. A majority of the differences arise from the fact that the United States physicians deal with multiple payers in comparison to Canadian physicians who deal with a single payer.

Researchers reported, in the United States, administrative costs are high as a result of different payers having alternative prior authorization requirements, pharmaceutical formularies, and rules for billing and claims payment. Conversely, in Ontario (where the researchers conducted their study of Canadian physician practices), physicians commonly collaborate with a single payer that offers one product, more standardized procedures for billing and payment and doesn’t regularly require former authorization of medical services for patients.

Lead author Dr. Dante Morra, medical director of the Centre for Innovation in Complex Care and assistant professor of medicine at the University of Toronto, says

“The major difference between the United States and Ontario is that non-physician staff members – nurses, medical assistants and clerical staff – in the United States spend large amounts of time obtaining prior authorizations and on billing.”

Researchers say therefore, health spending in the U.S. per capita is 87% higher than Canada – $7,290 vs. $3,895 annually. U.S. Administrative costs resulted by physicians and staff are estimated annually to be at least $82,975 per physician.

Senior author Dr. Lawrence Casalino, chief of the Division of Outcomes and Effectiveness Research in the Department of Public Health at Weil Cornell Medical College explains,

“If U.S. physician practices had administrative costs similar to those in Canada, the total savings for U.S. health spending would be about $27.6 billion per year.

Many factors contribute to the high cost of health care in the United States, but there is broad consensus that administrative costs are high and could be reduced.

Short of adopting a single-payer system, reducing these costs can be achieved by realizing efficiencies, such as by adopting standardized rules for transactions between physicians and health plans and communicating through electronic systems.”

Specific recommendations provided by the researchers including standardizing transactions as much as possible and sending them electronically instead of by mail, fax or phone, will not only help reducing costs but decreasing the so-called “hassle factor” of physicians and staff interruptions which interfere with patient care. Additionally, they cite Affordable Care Act changes like bundled payments, and the production of accountable care organizations, as possibly reducing administrative burdens in the long term.

Further discoveries from the investigation,

“U.S. Physician Practices Spend Nearly Four Times as Much Money Interacting With Health Plans and Payers Than Do Their Canadian Counterparts”:

U.S. Doctors on average, spend 3.4 hours per week interacting with health plans in comparison to around 2.2 hours Ontario doctors spend. U.S. Nurses and medical assistants spend 20.6 hours per physician per week on administrative tasks related to health plans, almost 10 times the time spent in Ontario.

Clerical staff in the U.S. spent per physician, per week 53.1 hours on administrative tasks related to insurance, in comparison with 15.9 in Ontario. A majority of the time difference comes from U.S. Clerical staff spending 45.5 hours on billing and 6.3 hours obtaining prior authorization.

In the U.S. Senior administrators spend more time per physician than in Canada, overseeing claims and billing tasks: 163.2 hours per year in the U.S. In comparison to 24.6 hours per year in Ontario.

Co-authors of the investigation include Dr. Sean Nicholson of Cornell University in Ithaca, N.Y., Dr. Wendy Levinson of the University of Toronto, and Mr. David N. Gans and Dr. Terry Hammons of the Medical Group Management Association, Englewood, Colo.

The study was partially supported by The Commonwealth Fund.

Written by Grace Rattue