EHRs fall short in reducing administrative costs

Study shows costs are just as high after clinical systems implemented as before they were widely adopted.

Electronic health records were expected to reduce administrative costs for providers, but a study of a large academic healthcare system with a certified EHR system reveals that the estimated costs of billing and insurance-related activities were substantial and varied depending on the type of clinical encounter.

Researchers from Duke University and Harvard Business School estimated the billing and insurance-related costs for five types of patient encounters—primary care visits, discharged emergency department visits, general medicine inpatient stays, ambulatory surgical procedures, as well as inpatient surgical procedures.

According to the results of their study published February 20 in the Journal of the American Medical Association, the estimated costs of billing and insurance-related activities ranged from about $20 for a primary care visit to approximately $215 for an inpatient surgical procedure—representing 3 percent to 25 percent of professional revenue.

“For primary care visits, this translated to an estimated more than $99,000 of billing and insurance-related expenses annually for each primary care physician working in the system just to get paid,” states a separate editorial accompanying the JAMA study.

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Overall, estimated processing time and total costs for billing and insurance-related activities were:
  • 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.
As a result, the JAMA editorial concludes: the study “suggests that, if anything, administrative time needed for billing has increased for physicians and other staff as EHRs have become more widespread.”

“We keep hearing about electronic health records and how they are supposed to improve the efficiency of hospital administration,” says study co-author Barak Richman of the Duke University School of Law and the Duke-Margolis Center for Health Policy. “We found that, as a general percentage of revenue, the amount expended on billing and administrative costs is just as high as it was before EHRs were adopted. Some people thought that EHRs were going to be the solution—and, they’re not.”

Richman declined to name the large academic healthcare system at which interviews were conducted with 27 administrators and 34 physicians in 2016 and 2017 to construct a process map charting the path of an insurance claim through the revenue cycle management process.

“It’s a health center, like other health centers, that has invested heavily in an electronic health record system,” he adds. “The point of the study is to select a healthcare system that is representative of the American hospital.”

Richman contends that EHRs “cannot be blamed for high administrative costs but they certainly cannot be credited for reducing administrative costs.” At the same time, given the significant financial investment of implementing an EHR system, he believes the capital costs make it a “questionable endeavor to begin with.”

As the JAMA editorial points out, while annual operating costs for the EHR were included in the estimate of billing costs, the capital costs of the EHR at the academic healthcare system were not. “When the full costs EHR installation and implementation were fully amortized and attributed to billing, the calculated costs of billing increased by another 44 percent to 68 percent.”

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