Administrative Costs Associated with Third Party Payment

What are the functional components and attendant costs of payment administration in an outpatient setting, the Palo Alto Medical Foundation (PAMF)? Researchers examined the procedures to obtain payment for delivered services, as well as activities required by insurers, such as credentialing and reporting. The researchers addressed two research questions: (1) what administrative functions are performed, and at what cost, to obtain third-party payment in a large, multi-specialty medical group practice; and (2) how would altering insurance or payment mechanisms affect administrative functions and costs? Because the PAMF has three divisions with notable operating differences, the researchers had a unique opportunity to explore what, if any, advantages may accrue from incorporating health information technologies into billing and insurance related functions within the current insurance system. The objective of this project was to provide policymakers with estimates to assess the cost implications of insurance reform options, ranging from specific changes, such as standard billing, to broad reforms such as expansion of public insurance.