Study: Health Care Administration Consumes Nearly One-Third of Health Care Costs

March 21, 2007 - Administration associated with health care claims and billing accounts for nearly one out of every three dollars that patients spend, according to a nationwide survey of executives from hospitals and insurance companies.

In contrast, more than three-quarters (76 percent) of the U.S. consumers surveyed said they think that health care administration should account for just 10 percent or less of total health care costs, with a large majority indicating they would be 'highly upset' if those administrative costs were as high as 30 percent. Approximately eight in 10 consumers (79 percent) said they would like to see an itemization of the portion of their health care bills that goes to administration versus clinical care.

The health care industry survey of 200 hospital and insurance company executives and 1,000 U.S. consumers was commissioned by The PNC Financial Services Group Inc., and conducted by the independent research firm Chadwick Martin Bailey.

"While it is possible that consumers do not fully appreciate the cost and complexity of health care administration, hospital and health plan executives identified significant inefficiencies in the business office, describing a medical claims, billing and payment process that is error prone, redundant and costly," said Paula Fryland, executive vice president and manager of PNC's national health care group (See Press Kit).

Additional survey results include:
- Hospital executives reported that one in five claims submitted, on average, is delayed or denied and 96 percent of all claims must be submitted more than once.

- Hospitals that do not use electronic billing or claims submission processes reported, on average, resubmitting a claim 11 times or more, or nearly four times more than those hospitals using electronic processes.

- Insurance executives surveyed said they go back to hospitals two times, on average, to get all the information needed to pay a claim.

- Nearly a quarter of consumers reported having had a legitimate claim denied by their health plan; one in five ultimately paid the claim out of their own pocket.