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Wonder Where the Money Goes?

Administrative Costs - the True Picture

Moving money from payers to providers costs more than $500 Billion!

The United States spent a leading $3.3 trillion in 2016 on healthcare ($10,348 per person) with administrative costs accounting for 20%-30% of every dollar paid on a medical bill.

In order to determine the provider’s cost of carrying out each step of a single bill, (the substantial cost to insurers of processing and paying these bills was excluded), researchers from Duke University and Harvard Business School reconstructed the entire life cycle of a medical bill…from the time a patient makes an appointment until the time the health system is paid.

The entire billing process was mapped out and the following information was included in the cost calculation:

  • Salaries of every position involved in the claim life cycle

  • The cost of negotiating prices with insurance companies

  • The cost of training professionals to handle billing-related tasks

  • The cost of ensuring that every potentially reimbursable service is added to the bill

  • Overhead costs such as office equipment and utility bills were also considered

Typical average billing costs and processing time for various health services were found to be:

  • Primary-Care visit ---------- $20.49 ---------- 13 minutes

  • ER visit ------------------------- $61.54 ---------- 32 minutes

  • Inpatient Medical ----------- $124.26 ---------- 73 minutes

  • Outpatient surgery --------- $170.40 ---------- 75 minutes

  • Inpatient  surgery ----------- $215.10 ---------- 100 minutes

Outside the healthcare industry, it can take roughly 100 full-time employees to collect $1 billion worth of bills. But when healthcare is involved, it takes 770 full-time equivalents to collect the same amount of money. As a result, the process of sending money from payer to healthcare providers consumes an estimated $500 billion per year.

The single, most significant way for hospitals to reduce their cost to collect, reduce days in A/R, and see revenues increase is to outsource some or all Revenue Cycle operations. Benefits to the hospitals include access to a deep knowledge base, streamlined workflows, reduced denial rates and optimized account resolution.


For more information, contact Medical Recovery Services

(816) 229-4887

Medical Recovery Services is a full-service revenue cycle company assisting

hospitals and surgical centers in achieving their full earning potential since 2004.

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