How electronic transactions could save healthcare $8B: 6 areas of opportunity

Although the healthcare industry has already saved tens of billions by making paper-based administrative processes electronic, providers and health plans could still save an estimated $8.1 billion annually through additional conversions from manual to electronic transactions, according to a report from the Council for Affordable Quality Healthcare.

That includes $6.7 billion in savings for healthcare providers and $1.4 billion for health plans each year. CAQH's findings are based on an analysis of an extensive dataset concerning major administrative transactions, collected through the U.S. Healthcare Efficiency Index initiative. The data includes information from more than 1 billion health insurance claims and 3 billion transactions. CAQH, in collaboration with Milliman Inc., also surveyed healthcare providers and health plans about the costs of manual and automated transactions.

CAQH focused on the following six processes/areas of opportunity for savings from a continuing shift from manual to electronic methods.

1. Claims submission. In 2012, 91 percent of claim submission transactions analyzed were already conducted electronically, according to the report. The remaining paper-based claims submissions cost the healthcare system $2.58 each — $1.84 for providers and $0.74 for payers. Meanwhile, electronic claims submissions cost the healthcare system $0.54 each — $0.28 for providers and $0.26 for health plans.

2. Eligibility and benefit verification. Although the prevalence of electronic methods for patient eligibility and benefit verification transactions is on the rise, many of the electronic transactions end up being duplicated by telephone. This undermines the effectiveness of electronic transactions, according to the report. The health plans included in CAQH's analysis reported handling more than 60 million phone calls in 2012 to verify eligibility and benefits. With each call costing the provider $3.55 and the health plan $3.28, non-automated eligibility and benefit verification calls resulted in roughly $4 billion in healthcare spending, according to the report. 

3. Prior authorization and referral certification. Of nearly 130 million prior authorization and referral certification transactions conducted in 2013, Milliman estimates about 110 million were handled manually — by phone, fax or paper-based communication. Average estimated costs per prior authorization and referral certification transaction were $0.18 for automated and $3.95 for manual for health plans, and $5.20 for automated and $18.53 for manual for providers. Overall, health plans could save $0.4 billion from automating these transactions, and providers could save an estimated $1.5 billion. 

4. Claim payment. Of the health plans included in the analysis, 44 percent reported making claim payments by paper check in 2012, at a cost of $0.66 each. However, the health plans feel expanded electronic fund transfer availability will lead to a rapid increase in the incidence of electronic claims payment. 

5. Claim status inquiries. In 2012, more than one in 4.5 claims prompted a status inquiry. While most of the inquiries were electronic, the health plans analyzed still handled 28 million inquiries conducted by phone, at a cost of $6.09 per transaction — $2.25 for providers and $3.84 for health plans. Overall, manual claim status inquiries accounted for $0.9 billion in unnecessary healthcare costs, according to the report. 

6. Claim remittance advice, and receiving and posting payments. Just over half (53 percent) of remittance advice documents processed by the health plans studied were electronic in 2012. Additionally, about 11 percent of the reported electronic claim remittance advice transactions were also requested on paper. With a cost of $0.45 per transaction, the redundant paper transactions resulted in $10 million in unnecessary spending. Overall, CAQH determined the healthcare industry could save an estimated $400 million by completely converting to electronic processes in this arena.  

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