Healthcare’s Most Fixable Cost Problem: Administrative Waste

This article originally published on MedCity News. 

The good news: fixing our ancient administrative infrastructure does not require technology that’s particularly experimental, nor does it require passing new laws or regulations. It does, however, require coordination.

Over the years, we’ve seen certain kinds of healthcare costs steadily climb. Administrative expenses at urban hospitals, for example, rose more than 90% between 2011 and 2022, according to government data. Hospital services climbed roughly 66% in that same time period. In the past year, though, healthcare and health insurance costs have begun increasing in an exponential way, rather than a linear one, and the tenor of conversations around healthcare costs has changed.

Insurance premiums are now a tough kitchen-table issue as more households face impossible choices. After a months-long political battle over expiring Affordable Care Act subsidies, those who receive subsidies will see premiums more than double, while those who don’t could see tenfold increases. But ACA is not how most of us receive health benefits.

Most Americans are covered by employer-sponsored plans, where costs are running 10% higher this year. By one estimate, the burden on employers is 62% higher than 2017 levels – an unreasonable squeeze that prevents organizations from investing in R&D or hiring new workers. For employees, 2026 premiums are rising twice as fast as inflation. It all adds up to healthcare costs forcing trade-offs for just about everyone, a sentiment reflected in a late-January KFF survey: two thirds of Americans are now more worried about the cost of healthcare than they are about groceries or rent.

This cost escalation has unfortunately not been driven by breakthrough treatments or any utilization trend. It’s driven by administrative waste, one of healthcare’s most readily fixable problems. Our healthcare system runs on cobbled-together legacy technology that constrains innovation and grinds administrative functioning to a halt. Think of how many times you’ve encountered an outdated billing system or had to fill out a hand-written medical history form. The good news: fixing this ancient administrative infrastructure does not require technology that’s particularly experimental, nor does it require passing new laws or regulations.

It does, however, require coordination. Payers and providers use hundreds of siloed, incompatible processes and systems that make information exchange nearly impossible. The lack of coordination between participants (provider and payer) and lack of coordination at scale (fragmentation and localization of participants) means costs do nothing but rise. What healthcare’s major players must do now is make a coordinated effort towards adopting data standardization protocols, along with proven technology that both cuts inefficiencies and brings soaring costs back down.

Processing health insurance claims, for example, should be a technological slam dunk. Widespread EMR (electronic medical record) adoption plus the rules-based nature of claims should make the area easy to automate. Is a service covered under a specific plan? Has the deductible been met? 30 pills or 90? The vetting of most claims should be straightforward, given clear standards. But in the U.S., claims processing still requires thousands of hours of manual work, especially when prior authorization is involved.

Prior authorization is a step requiring providers to get pre-approval from an insurer before they perform a service or treatment, which adds a particular complexity. While the majority of insurance claims are submitted electronically, the nonprofit Council for Affordable Quality Healthcare says only 35% of prior auth requests are handled electronically – meaning the rest come in via phone, fax or other offline means. Providers spend 13 hours a week, or some 600 hours a year, working through details of more than 100 million prior auth requests annually. This holds up claims processing and generally leads to worse health outcomes.

Companies like Cohere Health and Highmark Health have come up with creative initiatives around prior auth, including ambient listening, which uses AI to analyze patient data, and Highmark’s “gold carding,” which pre-approves gold-card-holding physicians with historically strong approval rates. In January, Anthropic rolled out new agentic capabilities around prior auth, putting new pressure on both legacy players and startups. Convincing large health systems to implement any part of these solutions at scale will require much more creative thinking and importantly, coordination.

Another administrative handoff that should be a breeze with EMRs but has remained largely manual: Release of Information. This means sharing medical records with approved parties – perhaps another provider, an insurer, an attorney or the patient themselves. Hospitals process thousands of such requests each day. But strict Health Insurance Portability and Accountability Act (HIPAA) requirements, combined with a general lack of interoperability, means the administrative burden of Release of Information requests is enormous. Many hospital systems can’t exchange information easily with other healthcare entities, not to mention some records need special formatting or redaction. Companies like Healthmark Group and Datavant have spent years designing digital tools to make Release of Information easier. Still, in 2026, a business process that’s a perfect candidate for automation remains part of an interoperability maze that costs the U.S. healthcare system $30 billion per year.

Costs this high should translate to Americans seeing improved health outcomes or expanded access; unfortunately, they simply reflect an American healthcare system that’s failed to update its infrastructure. In any other year, runaway healthcare costs might be cause for concern but would likely remain an insider policy discussion. In 2026, healthcare expenses are on the minds of nearly all Americans. This means healthcare’s major players – including payers, providers and self-insured employers – will have broad support for initiatives that tackle high administrative costs directly.

Cutting healthcare costs meaningfully will take time and coordinated effort. But one of the clearest places to start, a tactic that’s unlikely to face opposition, is reducing system-wide administrative waste. The basic technology needed to do so is not new, nor are shared standards for information exchange around records and billing. Streamlining does not require new regulatory approval; it simply requires that healthcare stakeholders agree that the status quo in our current system is too costly to defend.

Editor’s note: Neither the author nor his company have any relationship with the companies/products mentioned. 

Photo: bestdesigns, Getty Images