Healthcare administration is a growing issue in United States of America with an estimated $361 billion spent to cover administrative charges annually, according to the Center for American Progress. The healthcare expenditure in U.S alone makes up for 14 percent of total healthcare expenditure worldwide. In order to reduce these costs, healthcare IT solutions can play a huge role. Through improvements in IT in the current health delivery methods, the industry can expect to significantly cut down costs.
The New England Journal of Medicine, citing the Harvard University Department of Economics, states that “The average U.S. physician spends 43 minutes a day interacting with health plans about payment, dealing with formularies, and obtaining authorizations for procedures.” In the report released by the Center for American Progress in June 2012, experts estimate that adoption of electronic transactions, or adoption of IT, can lead to a potential $26.1 billion in annual savings.
Taken together, these efforts could reduce excessive administrative costs by 25 percent or $40 billion annually. That $40 billion is about 3.5 percent of projected spending on Medicare, Medicaid, and other mandatory federal health programs in 2015.6 An aggressive agenda tackling administrative inefficiency would not only reduce unnecessary complexity and federal health expenditures but could also improve the quality of care provided. Tackling excessive administrative costs offers a promising opportunity for reducing health care costs while improving the quality of care for all Americans.