of Rhode Island

Hospital Association

A recent study by Health Affairs found 25% of total hospital expenditures in the United States were for administrative costs. Hospitals in Rhode Island estimate administrative costs (billing, authorization, status, appeals, etc.) for each health care claim are approximately $7. While many administrative functions are essential to providing high-quality care, when they become redundant, inconsistent or excessive, they divert resources from patient care and contribute to growing costs. 

HARI was a leader in forming a statewide workgroup aimed at streamlining insurer/provider transactions and standardizing process.  The Administrative Simplification Taskforce was convened by the health insurance commissioner and included representatives of hospitals, 

physician practices, community behavioral health organizations, each insurer and other affected entities. Unfortunately, the Office of the Health Insurance Commissioner recently paused the work of the taskforce due to budget constraints.  However, many issues must still be addressed to ensure efficient, affordable care for Rhode Islanders. 

Patient Financial Liability
Hospitals have advocated for stakeholders to address the growing issue of patient financial liability as increased co-payments and deductibles have made it difficult for many Rhode Islanders to afford care and place a significant administrative burden on providers. Hospitals collect only 27% of patient financial liability, over recent years, the amount of uncollected dollars has increased by 20%.  HARI and its members advocate for standardizing the collection and education process, establishing an affordability standard, limiting services that require a deductible, and better use of insurance identification cards. 

Physician credentialing also remains a significant administrative burden. HARI members report significant delays in physician credentialing, which impedes access to care  and could result in a poor patient experience.

Under the Affordable Care Act, the right to appeal a denied health insurance claim was expanded. Insurers have the responsibility to inform a provider why a claim was denied and providers have the ability to appeal a denial within six months. However, the administrative process to submit an appeal is plan specific and can cause confusion and lead to administrative burden for both the provider and insurer. In 2013, the American Medical Association estimated that $12 billion (21% of total administrative costs) could be saved each year if insurers eliminated unnecessary administrative tasks with streamlined process for medical claims. They also found that the cost per claim for avoidable errors, inefficiency, and waste the in medical claims process was $2.36. With rates as high as 4.92%, this is an issue. 

Administrative expenses place a heavy cost burden on patients, as well as providers. While many administrative functions are necessary, there are also costly, inefficient processes that have no benefit toward the quality of care provided to patients. By streamlining and standardizing some of these processes, greater efficiency will be introduced and the burden of administrative costs will decrease benefiting patients, providers and health plans.