EHR Adoption Does Not Lower Administrative, Medical Billing Costs

February 26, 2018 - Electronic health records (EHRs) did not reduce insurance-related and medical billing costs despite the federal government’s claims that EHR adoption would lower administrative expenditures, according to a recent Journal of the American Medical Association study.

Administrative costs related to medical billing accounted for as much as one-quarter of professional revenue, researchers from Duke University and Harvard Business School found after studying a large academic medical center with certified EHR technology.

A time-driven, activity-based costing analysis at the North Carolina-based academic medical center showed that the estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure.

EHR adoption also failed to reduce processing times for medical billing, resulting in higher costs. The study of five healthcare encounters showed the following processing times and estimated costs:

• 13 minutes and $20.49 for a primary care visit

• 32 minutes and $61.54 for a discharged emergency department visit

• 73 minutes and $124.26 for a general inpatient stay

• 75 minutes and $170.40 for an ambulatory surgical procedure

• 100 minutes and $215.10 for an inpatient surgical procedure

Based on the cost estimates, researchers estimated that primary care and emergency department visits accounted for 14.5 percent and 25.2 percent of professional revenue, respectively, followed by 13.4 percent for ambulatory surgical procedures, 8 percent for general medicine inpatient stays, and 3.1 percent for inpatient surgical procedures.

These values are not far off from previous research that shows medical billing costs before EHR adoption were between 10 and 14 percent of revenue.

The findings indicated that EHR adoption failed to live up to its promise of lowering administrative costs by processing medical bills under one system. Rather, medical billing costs may be just as high or higher after EHR adoption.

“We found no evidence that adoption of these expensive electronic health record systems reduced billing costs related to physician services,” said study author Kevin Schulman of the Duke Clinical Research Institute at the Duke University School of Medicine, and Harvard Business School.

Co-author Robert S. Kaplan of Harvard Business School explained that EHRs were not to blame for high medical billing and insurance-related costs because the academic medical center in the study already achieved significant economies of scale by streamlining all of its medical billing functions within a single system.

“The high costs were not caused by wasteful, inefficient processes, duplicate or redundant tasks, or the inappropriate use of high-wage personnel to perform low-skilled tasks,” he stated.

Instead, researchers pointed to contract variations between hospitals and payers, as well as varying rules and pricing structures by payer. Certified EHR systems have been unable to effectively integrate and manage the complexity of payer contracts.

“To a large degree, the significant administrative costs measured in this study are the consequences of heterogeneous payment requirements across the multiple payers and health plans contracting with the academic health center,” stated study author Barak Richman of the Duke University School of Law and the Duke-Margolis Center for Health Policy. “We need to understand better how complexity is driving these enormous costs within the system, costs that do not add value to patients, employers, or providers.”

Healthcare stakeholders and policymakers should partner to better understand medical billing complexities and how health IT systems can improve value for physicians, instead of adding to their burdens.

“We hope that this work is the first step toward informing policy solutions that could reduce these non-value-added costs largely hidden within the healthcare system,” Schulman stated.