Administrative costs of health care have received limited research attention. The nature and behavior of these costs remain ill defined, and their cause-effect relationships are poorly understood. They are difficult to define, identify, quantify, compare, or evaluate. As a consequence, health managers and policy analysts have encountered considerable difficulty in developing strategies for their management, containment, or reduction. The purpose of the proposed research is to identify and construct a typology of administrative costs, not only within each segment chosen for the study, but also between and among the segments (hospitals, insurers, HMOs). Included in the typology will be a methodology to identify the order of magnitude of administrative costs, determine their nature and behavior, develop preliminary strategies for their control, and outline the likely consequences of their reduction. The methodology is intended to be general- izable so that it can be used to investigate other segments of the health care system. The research program will be based on a series of case studies. These will include site visits, structured and unstructured interviews, and document analysis in different types of organizations in the U.S. health care system. Data will be gathered about the site (which macro level studies have attempted to do) but also about the cost-driving activities at that site, and how those activities affect activities at other sites and levels within the health care system (which macro studies have not attempted to do). These data, plus those from interviews and other sources will be used to construct a set of descriptive case studies of administrative costs. The construction of a typology of administrative costs will result. The results of this study will contribute to the effectiveness, efficiency, and quality of health care services, specifically in the area of achievement of access to preventive services for all Americans. This specifically supports the Healthy People 2000 initiative. The overall intent is to provide objective evidence on potentially avoidable administrative costs that can be of assistance in future policy decisions. It has been suggested that reducing administrative costs through a single-payer system would save enough money to fund coverage for all uninsured and underinsured Americans.
