Speeches & Floor Statements

Reducing Health Care Costs: Decreasing Administrative Spending

Posted on July 31, 2018

The Senate Committee on Health, Education, Labor and Pensions will please come to order.

Senator Murray and I will each have an opening statement, and then I will introduce the witnesses.

Then we will hear from the witnesses and senators will each have five minutes to ask questions.

This is our third hearing on reducing health care costs.

At our last hearing, Dr. Brent James testified that a minimum of 30 percent and as much as 50 percent of all health care spending is waste.

Let’s pause for a minute and realize what a remarkable statement that is.

Dr. James has led a major health care system and is a member of the Institute of Medicine, and we had a panel of equally impressive witnesses, and nobody really disagreed with his estimate.

At that hearing, we focused on reducing what we spend on health care by examining two things: one, on reducing unnecessary health care tests, services, procedures, and prescription drugs, and two, how to increase preventive care.

This time, we are examining the cost of administrative tasks – which includes everything from the time spent filling out insurance claims to buying software for an electronic health records system.

Administrative costs are much higher in United States than in other countries. According to Dr. Ashish Jha, a witness at our first hearing, administrative costs accounted for 8 percent of all health care spending in the U.S., roughly, that is $264 billion, compared to only 1 percent to 3 percent for other countries.

While many administrative tasks in the health care system come from outside the federal government—such as insurance company or state requirements—the federal government is clearly at fault for some of this burden.

For example, there was a lot of excitement over electronic health records in Washington – many said these records systems would make it easier for doctors and patients to access a patient’s health records and share information with other doctors.

Since 2011, the federal government has spent $38 billion requiring doctors and hospitals to install electronic health records systems through the Meaningful Use program in Medicare and Medicaid.

The federal government provided payments to doctors and hospitals to buy those systems, and also created specific requirements for how doctors must use the systems, penalizing doctors who did not comply.

Unfortunately, electronic health records systems have ended up being something physicians too often dread, rather than a tool that’s useful.

For example, Dr. Reid Blackwelder, a family physician who chairs a residency program with three clinics in the Tri-Cities area of East Tennessee, is required to have an electronic health records system because he sees Medicare and Medicaid patients.

He initially received payments from the federal government to implement the electronic health records system, but he now has to pay a monthly maintenance fee to the electronic health records company as well as paying for periodic upgrades to the system.

All of these costs add up to being far more expensive than the paper records he used to keep, or the initial payments the government provided.

But he still is not able to see the electronic health record of a patient discharged from the hospital across the street.

That is because the hospital does not use the same software that Dr. Blackwelder does, so instead he has to call the hospital and have paper copies of his patient’s records faxed over to his office.

There is technology that Dr. Blackwelder could buy to make his electronic health record system communicate with the local hospital records systems so he wouldn’t have to have them fax the record to his office. 

However, he would have to pay $300 per month to the electronic health records company for each of the 88 doctors and nurses in his practice.

What this means is that, for his 88 doctors and nurses, Dr. Blackwelder would have to spend $26,400 every month – and $316,800 a year – just to see his patients’ electronic health records from the hospital across the street or other doctors.

The electronic health records system, which was supposed to make things easier and simpler, has instead made record keeping more expensive – and Dr. Blackwelder still can’t see the records of a patient released from the hospital he can see from his office window.

This is just one example of how well-intentioned ideas from Washington can turn out to add to the administrative burdens doctors face.

According to the American Hospital Association, there are 629 different regulatory requirements from four different federal agencies that doctors, hospitals, and other health care providers have to comply with.

These requirements range from credentialing doctors and nurses to participate in Medicare to maintaining compliance with privacy laws such as HIPAA to making sure the right signs are hanging around a doctors’ office.

The average community hospital needs 23 full time employees just to keep up with the regulations about what a hospital needs to do to participate in Medicare – called “Conditions of Participation,” according to the American Hospital Association.

When the federal government adds just one more question or one more rule, it may not seem like it makes much of a difference.

But added together, for doctors like Dr. Blackwelder and to hospitals, those questions and rules add up to more time spent on paperwork, less time actually treating patients, and an increase to the cost of health care.

The Trump Administration has taken a look at what administrative tasks are required by the federal government and I am glad to see that Seema Verma, administrator of CMS—which oversees Medicare and Medicaid—recently proposed streamlining many of the agency’s burdensome reporting requirements. 

This is one step, and I look forward to hearing about more the federal government could do to reduce administrative tasks today.

As we look at how to reduce health care costs, we should keep in mind that what may seem like a good idea or a magic bullet in Washington may actually result in something very different for doctors and nurses.

 

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