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Cut Administrative Costs in the Health System

Cut Administrative Costs in the Health System

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David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain how to achieve significant administrative savings in the health system.
David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain how to achieve significant administrative savings in the health system.

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Published by: Center for American Progress on Oct 26, 2011
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10/26/2011

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1Center or American Progress | Replace Fee-or-Service with Bundled Payments in Medicare
Cut Administrative Costsin the Health System
 David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro October 2011
Te Institute o Medicine estimates that the United States spends nearly $360 billionannually on administrative costs.
1
As much as hal o that is unnecessary and excessive.Estimates suggest that administrative simplication could reduce the systemwide costso health care administration by about $40 billion per year.
2
Payers and providers agree that the system is broken. And they even agree on many o the operations needed to achieve administrative simplication. Some o these steps werecodied in the Aordable Care Act, such as the development o standard operating rulesor the electronic processing and billing o many common medical services. Signicantadministrative savings can be achieved by ensuring eective implementation o the ACA. But there is more to be done.
Recommendations
Require electronic integration of administrative functions such as billing, priorauthorization, and payments.
 
Te HIECH Act, part o the American Recovery andReinvestment Act, invested in health inormation technology that is put to meaning-ul use. Te act currently ocuses on the electronic exchange o 
clinical
inormation;to achieve administrative efciencies,
administrative
inormation must be exchangedelectronically, too. Electronically integrating clinical and administrative unctions—so that the recording o clinical services ordered or a patient automatically bills theinsurer, or example—should be required as one o the criteria or meaningul use o electronic health record technology.
Require providers to transmit and receive eligibility, claims, and other administrativeinformation electronically as soon as the relevant operating rules are specified.
Asrequired by the ACA, development o operating rules on eligibility, claims, and otheradministrative inormation is already underway. Medicare plans to require electronic

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