Economic analysis of an automated billing system for physicians' services

An on-line Medicaid billing system for physicians' services was implemented and tested during a two and one-half year period in 100 offices throughout the State of +0.50,Alabama. Participating physicians represented 17% of all physicians in the state. The monthly volume of Medicaid claims entered through the system represented more than 50% of the statewide load processed by the Medicaid carrier. Users entered claims data on standard Touch Tone telephones equipped with Carddialers, and received instructions and data confirmation from the central computer facility via voice answer-back. Input time for the average claim billing for two separate services was less than one and one-half minutes and resulted in a reduction of clerical labor required for manual input by at least 50%. After a fee-for-service was inaugurated, the system workload remained at 86% of its load level before fee for service. Those physicians willing to pay for the billing service were high-volume users who had come to depend on the system and who appreciated the economics that the system had achieved for them in their office billing practices. An average claim consisting of two items of service could be billed at a cost of $0.50,, exclusive of user terminal rental ($6 per month per office) and the cost of data entry personnel (between $0.05 and $0.10 + 0.05 and $.10 per claim). Various algorithms have been offered for use in estimating an annual budget for an on-line billing system given alternative system configurations, methods of financing, annual volume of units of service, and the geographical nature of the population to be served. The tasks of preparing, processing, and storing insurance claims information have placed a costly and time-consuming burden on both providers of medical services and fiscal intermediaries. The unfortunate result is that the cost of submitting an insurance claim for professional medical services is a disproportionate fraction of the amount paid for providing the service. For general practitioners, who provide the largest number of individual services, this share may be more than one-fourth of the payment for most common services. Similarly, for the Medicaid or Medicare intermediary or for the insurance carrier, the cost of preparing and recording data from source documents is a large part of total processing costs. The objective of the On-Line Medicaid Billing System project was to demonstrate that it is possible to reduce the costs of submitting claims from the physician's office as well as to reduce the costs of data preparation in the carrier's system. This publication focuses on an economic analysis of cost effectiveness. Readers interested in system design, development, and on-line operation will find detailed descriptions in previously published reports.