Health Affairs, 24, no. 6 (2005): 1629-1639 doi: 10.1377/hlthaff.24.6.1629 © 2005 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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DataWatch

The Cost Of Health Insurance Administration In California: Estimates For Insurers, Physicians, And Hospitals

Administrative costs account for 25 percent of health care spending, but little is known about the portion attributable to billing and insurance-related (BIR) functions. We estimated BIR for hospital and physician care in California. Data for physician practices came from a mail survey and interviews; for hospitals, from regulatory reporting; and for private insurers, from a consulting company. Private insurers spend 9.9 percent of revenue on administration and 8 percent on BIR. Physician offices spend 27 percent and 14 percent, and hospitals, 21 percent and 7–11 percent, respectively. Overall, BIR represents 20–22 percent of privately insured spending in California acute care settings.

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