The U.S. healthcare system in the U.S. is unnecessarily spending billions per year by continuing to use manual administrative processes for basic transactions, according to the 2015 CAQH Index.
Despite steady increases in the industry adoption of HIPAA electronic administrative transactions, CAQH, a nonprofit dedicated to streamlining the business end of healthcare, recently highlighted an opportunity to save an additional $8 billion each year.
According to CAQH Explorations, more than $31 billion each year is spent by healthcare providers conducting basic business transactions with health plans. A good portion of this expense can be attributed to resource-intensive manual processes such as phone calls to verify patient coverage, or mailing claims and paper checks.
“An industry-wide transition to replace manual processes with electronic, real-time transactions is reducing the cost of doing business in healthcare and meaningfully impacting efficiency, productivity, and data quality,” said CAQH’s new report. “Measuring the progress of this transition helps identify which electronic transactions are being adopted successfully and which are being adopted at a slower pace.”
The CAQH Index does just that. The 2015 annual report presented trends in adoption rates and cost savings associated with the shift to electronic transactions, based on surveys of healthcare providers and health plans. Participating health plans represent over 118 million covered lives – nearly 45 percent of the commercially insured U.S. population – and more than four billion claims-related transactions. The Index is currently the only industry source that tracks the industry-wide transition to “full adoption” of electronic transactions.
Adoption of fully electronic transactions continues to vary significantly. Nearly 94 percent of claim submissions, 71 percent of eligibility and benefit verifications, 61 percent of claim payments, 57 percent of claim status inquiries, and 49 percent of coordination of benefits were designated as fully electronic, while only 10 percent of prior authorizations and six percent of referral certifications were.
The average increase in adoption across transactions was 4.5 percentage points, compared to 3.0 percentage points in 2013. The greatest increases in adoption last year were seen in the areas of claim status inquiry (nearly 7 percent) and eligibility and benefit verification (5 percent).
Despite increasing adoption of fully electronic transactions, the volume of telephone inquiries remained stable for both eligibility and benefit verifications and claim status inquiries. This is unfortunate, as eligibility and benefit verifications and claim status inquiries were far less costly when conducted electronically. Last year, responding health plans still reported over 120 million transactions in which representatives of the health plans and healthcare providers connected via phone to complete the transaction.
The Index noted that the use of partially electronic methods, such as health plan-sponsored web portals and interactive voice response (IVR) systems, continued to increase for some transactions but is declining for others. Use of partially electronic transactions was most common for prior authorizations (58 percent) and referral certifications (82 percent). For other transactions such as eligibility and benefit verifications and claim status inquiries, the volume of partially electronic transactions continued to decline while the volume of fully electronic transactions increased.
As part of its comprehensive review, CAQH also looked at the dental industry. Last year, adoption of fully electronic transactions using HIPAA standards was significantly lower for dental as compared to broader healthcare, ranging from nearly 17 percentage points lower for eligibility and benefit verifications to 55 percentage points lower for claim payment. Adoption rates were: claim submission (nearly 70 percent), eligibility and benefit verification (56 percent), claim status inquiry (27 percent), and claim payment (6 percent). A notably larger share of claim status inquiries were conducted using web portals and IVR systems, compared to broader healthcare (46 percent versus 34 percent).
The direct labor cost per transaction continued to vary across transactions and methods. For healthcare providers, manual transactions were far more costly than electronic transactions. On average, each manual transaction costs providers and health plans $2 more than each electronic transaction. For health plans, direct costs averaged $2.30 per manual transaction and $0.04 per electronic transaction, and for healthcare providers, direct costs averaged $3.54 per manual transaction and $1.34 per electronic transaction. The industry (providers and health plans combined) cost averaged $5.87 per manual transaction and $1.34 per electronic transaction.
Taking these numbers into account, transitioning from fully manual to fully electronic processes could save commercial health plans and healthcare providers approximately $8.5 billion annually. This figure assumes that 16 billion administrative transactions flowed between commercial health plans and healthcare providers last year. Of the 16 billion, health plans processed an estimated 900 million manually, and healthcare providers conducted another 2.5 billion manually. If the industry adopted electronic processes for these manual transactions, the annual savings would be an estimated $1.7 billion for health plans and $6.8 billion for healthcare providers.
CAQH rightly pointed out that while the healthcare industry has made significant progress, the transformation is far from complete, and all stakeholders must align around the imperative to reduce cost and inefficiency. “When healthcare administrative data is electronic, it simplifies business processes and real-time use of information,” the report said. “This in turn supports innovative applications of data analytics that can yield reduced costs, elevated quality and consistency of healthcare delivery, and an exceptional experience for healthcare consumers.” CAQH outlined several actions to deliver on this promise. All require a good deal of coordination between business and government.
Are you making critical decisions based on inaccurate data? Are inefficient processes eating away at your time and your company’s bottom line? Even worse, is this inaccurate data impacting customer experience and putting your business at risk? Get the Process Improvement Playbook: Overcoming the Hurdles of Manual Processes in the Workplace.