Administration Costs Consume Nearly One-Third of Healthcare Dollars

Administration associated with health care claims and billing accounts for nearly one out of every three dollars that patients spend on health care, according to a nationwide survey of executives from hospitals and insurance companies.

In contrast, more than three-quarters (76 percent) of the U.S. consumers surveyed said they think that health care administration should account for just 10 percent or less of total health care costs, with a large majority indicating they would be "highly upset" if those administrative costs were as high as 30 percent. Approximately eight in 10 consumers (79 percent) said they would like to see an itemization of the portion of their health care bills that goes to administration versus clinical care.

The health care industry survey of 200 hospital and insurance company executives and 1,000 U.S. consumers was commissioned by The PNC Financial Services Group, Inc., (NYSE: PNC – News; http://www.pnc.com) and conducted by the independent research firm Chadwick Martin Bailey.

"While it is possible that consumers do not fully appreciate the cost and complexity of health care administration, hospital and health plan executives identified significant inefficiencies in the business office, describing a medical claims, billing and payment process that is error prone, redundant and costly," said Paula Fryland, executive vice president and manager of PNC’s national health care group.

Nearly three-quarters of executives from hospitals and two-thirds of executives from insurance companies indicated that making the claims, billing and payment process more efficient throughout the health care system would help slow the rising cost of health care in the U.S. Similarly, nearly three- quarters of consumers (72 percent) agreed.

"Health care consumerism is an emerging trend that transfers more decisions regarding health care choices, as well as responsibility for payments, back to the patient," said Fryland. "The survey supports that this growing trend will result in consumers seeking more information about their health care costs. And, both hospital and insurance executives agreed that the demand for transparency will focus on administrative overhead costs that will ultimately root out inefficiencies."

The PNC e-Health Study was conducted by the independent research firm, Chadwick Martin Bailey, based in Boston, Massachusetts. The study was based on telephone interviews conducted with 150 executives from U.S. hospitals or health systems, 50 executives from insurance organizations and an online survey of 1,000 U.S. consumers. The survey was completed in February 2007. A PNC e-Health Study media kit containing survey highlights and background information is available through PNC’s website at http://www.pnc.com/go/presskits.