A new study finds that the extra time and labor physician practices spend on interacting with insurance companies and government entities cost U.S. physicians $82,975 each per year, while doctors in Ontario spent $22,205.

Cornell researchers, publishing in the August issue of the journal Health Affairs, said that U.S. physician practices spend nearly four times more per physician than Ontario doctors primarily because Canada's single-payer system is simpler.

Canadian physicians follow a single set of rules, but U.S. doctors grapple with different sets of regulations, procedures, requirements, formularies and forms mandated by each health insurance plan or payer. The average U.S. doctor spent 3.4 hours per week interacting with health plans; Ontario doctors spent 2.2 hours. The bureaucratic burden falls heavily on U.S. nurses and medical practice staff, who spent 20.6 hours per physician per week on administrative duties; their Canadian counterparts spent only 2.5 hours on paperwork.

"The magnitude of that difference is what is interesting," said study co-author Sean Nicholson, professor of policy analysis and management in the College of Human Ecology. "It's the nurse time and the clerical time, rather than physician time, that's different. That's driving the increased costs."

Nicholson said the idea for the study came from co-author Dr. Lawrence Casalino, the Livingston Farrand Associate Professor of Public Health and chief of the Division of Outcomes and Effectiveness Research at Weill Cornell Medical College. "Larry lived these issues for 20 years as a practicing physician. As a researcher he suggested quantifying how much time physicians and their staffs spend interacting with health plans and comparing it to a single-payer system," Nicholson said.

The authors offer ideas U.S. policymakers and health insurers could use to streamline inefficiencies and reduce administrative costs. Chief among them: Standardize transactions and conduct them electronically; physical mail, faxes and telephone calls slow things down. Yet the researchers do not indict health care insurers.

"We're not saying that these extra $27 billion are wasted," Nicholson said. "Health insurance companies put these rules in place to keep health care costs down. The $27 billion of 'extra' cost to the physician practice have to be balanced against the benefits that come from following these rules. If the benefits are $100 billion in savings, this would be time well spent. Or it could be that there are zero benefits."

Since the study establishes estimated costs to run a medical practice in the United States, Nicholson said it's time to examine which rules make cost-benefit sense and should be kept or jettisoned.

"That's what we hope will come out of this," he said, "that informed decisions can be made by private and public health care insurers about what really works and what is not worth the money."

Nicholson and Casalino wrote the paper with four colleagues. Funding came from the Robert Wood Johnson Foundation.