October 21, 2021
The management consulting firm McKinsey & Company has issued a new report estimating that administrative changes and efficiencies could save the US health system more than a quarter trillion dollars.
As noted in a Viewpoint article published in JAMA on October 20:
“The analysis dissected profit and loss statements of individual health care organizations, estimated spending on specific processes, and compared administrative spending in health care with that of other industries. The conclusion of the report is that an estimated $265 billion, or approximately 28% of annual administrative spending, could be saved without compromising quality or access by implementing about 30 interventions that could be carried out in the next 3 years.2 This set of interventions works within the structure of today’s US health care system in order to preserve its market nature (eg, multipayer, multiclinician, multi–health care center) and the associated benefits (eg, world-leading innovation in care delivery).”
According to the article:
“The starting point is 5 functional areas that account for approximately 94% of administrative spending (see eTable in the Supplement). The largest of these is industry-agnostic corporate functions: general administration, human resources, nonclinical information technology, general sales and marketing, and finance. This functional area accounts for an estimated $375 billion of spending annually. The second-largest category is the financial transactions ecosystem, which includes claims processing, revenue cycle management, and prior authorization, accounting for an estimated $200 billion annually. The rest is made up of industry-specific operational functions, such as insurance underwriting (an estimated $135 billion annually), administrative clinical support operations such as case management (an estimated $105 billion annually), and customer and patient services such as call centers (an estimated $80 billion annually).
“For each of these functional focus areas, known interventions that could reduce spending without harming patient care were considered. This meant using a financial and operational perspective for the analysis, but also acknowledging that these interventions could and likely will have broader benefits on other outcomes, such as access, quality, patient experience, physician satisfaction, and equity.”
The report from McKinsey & Co., entitled “Administrative simplification: How to save a quarter-trillion dollars in US healthcare,” is available from the McKinsey website. The publication is a free download however registration is required.
Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems in the US and several other nations.
Page last updated Oct. 21, 2021 by Doug McVay, Editor.