Do EHRs Save on Administrative Costs? Study Contradicts Expectations

Early on, the belief that EHRs would reduce administrative costs for providers was widespread. A study says that hasn't been the case. But it may not be the fault of EHRs themselves.

Electronic health records (EHR) aren’t able to reduce administrative costs, according to a study published February 20 in the Journal of the American Medical Association (JAMA).

The study aimed to determine the administrative costs of billing and insurance-related activity at an academic healthcare system with an EHR. The study looked at the amount of time it took to complete billing and insurance activities in the EHR and the cost of personnel and overhead. The study authors then used the cost data to determine what percentage of professional revenue the costs represent.

Both the estimated cost and the percentage of professional revenue represented by the cost varied greatly.

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A primary care visit cost $20.49 to process, with the physician’s billing activities accounting for $6.36 of the total and representing 14.5% of professional revenue. An emergency department visit cost $61.54 to process, including $10.97 for the physician’s activities representing 25.2% of professional revenue. An inpatient surgical procedure cost $215.10, with $51.20 for the physician’s activities representing 3.1% of professional revenue.

In an editorial published in JAMA, the study authors discussed how their findings contradicted the early belief that EHRs would reduce administrative costs for providers. Federal programs to encourage EHR adoption such as the EHR Incentive Program touted the ability of EHRs to ultimately reduce administrative costs. Even after widespread adoption of EHRs, the healthcare industry continues to see inordinately high costs related to billing activities as compared to other industries.

However, the blame might not fall on the EHRs themselves, according to the study authors. Different payers have different requirements for billing and processing claims, making it difficult for provider organizations to implement efficient billing systems and eliminate duplicative processes. Payers might also contribute to the cost of billing and wasteful processes with inefficient internal policies. The JAMA editorial noted that it’s common for payers to initially deny charges—a study cited in the editorial found that up to 12.6% of billed charges are initially denied—but that up to 81% of initially denied charges are later paid.

The study authors concluded that many provider organizations with EHRs have not fully mapped the actual costs of care, billing, and related EHR administrative costs. More information on how billing activities contribute to administrative expenses could help guide future EHR policies.

This article was originally published February 23, 2018, by HCPro's Revenue Cycle Advisor.