Publishing Questions Raised and Answers Given on the Interpretation of the provisions of the tax code and revenue regulations pertaining to documentary stamp tax.

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The synthesis and comparison of administrative costs estimates that have been presented in these proceedings is a critical step in the process of creating a coherent picture of total costs of health care. Several presentations have made the case that there are significant excess costs associated with billing, insurance and reimbursement activities at the provider level. However, due to the lack of definitive benchmarks for these activities, the precise estimate of excess costs is a matter of debate.

A common thread among the various estimates is that BIR-related activities represent an important component of total healthcare costs. However, there is a wide range of opinions as to how much of the overall cost is attributable to BIR and how that relates to the costs of providing medical services.

Three features characterize Bir77 activities at the provider level: complexity, variability and friction. These features are driven by a highly fragmented payment system that includes numerous steps: contracting with insurers; managing claims and benefits; determining patient eligibility and cost sharing; collecting copayments, formulary and prior authorization; coding services delivered; checking and depositing payments; and resolving denials and underpayments.

In addition to the difficulty of identifying a benchmark, studies have often been limited in scope and sample size. As a result, it has been difficult to compare the results of different studies and to develop an estimate of excess costs. To address these limitations, the present analysis has attempted to identify and reconcile differences in the scope and methodology of these estimates and to create a summary table that allows for a more comprehensive assessment of the excess costs associated with BIR-related activities.

The summary table derives its estimates of excess BIR costs from a simple multiplicative calculation: National Health Expenditures projections for 2009 (CMS, 2007) divided by the percentage of revenue attributable to BIR as determined by studies of individual physician practices (Casalino et al., 2009; Kahn et al., 2005; and Sakowski et al., 2009). The final value in this table is an upper bound estimate of excess BIR costs because it relies on a preliminary benchmark ratio that will likely be revised as further research in specific sectors of the health sector is conducted. A similar process can be used to construct an estimate of excess costs at the hospital level. The sensitivity of this estimated excess is shown in the sensitivity table that accompanies the summary table. Ultimately, broadened and improved BIR research will help to improve this estimate of excess administrative costs and its relevance to the overall costs of medical care in the United States. Ultimately, these findings will be useful for the development of policy initiatives to reduce BIR-related costs and increase efficiency in healthcare. This is a critical goal in the face of growing deficits that are largely attributable to the rising cost of health care and the need for additional reforms to control growth in healthcare spending.