Administrative Simplification and the Potential for Saving a Quarter-Trillion Dollars in Health Care

A new report provides an extensive evaluation of administrative spending to determine which parts are necessary and which could be simplified. 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. 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). The starting point is 5 functional areas that account for approximately 94% of administrative spending. 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.