Automating Claims Management Processes Reduce Costs for Providers
The healthcare industry is often associated with providing medical care to patients. However, behind the scenes, healthcare providers must navigate an extensive and complex system of administrative tasks. These tasks involve everything from verifying a patient’s insurance information to submitting and receiving payments. They are essential for the functioning of the healthcare system, but they come with a hefty price tag.
In 2022, the Council for Affordable Quality Healthcare, Inc. (CAQH) released its annual Index report, which analyzed administrative transaction data from medical and dental providers. The report found that despite post-pandemic factors that led to an increase in total spending, healthcare providers continued to make progress in automating their administrative processes. However, the report also showed that there is room for further improvement.
Electronic Adoption in Healthcare
The Index report found that electronic adoption in healthcare increased by an average of 5 percentage points across the medical and dental industries in 2022. This is a positive trend, as electronic transactions have been shown to be faster, more accurate, and more cost-effective than manual transactions.
Acknowledgments and claims submissions had the highest automation adoption rates for both medical and dental providers. However, attachments had the lowest electronic adoption rate in the medical industry, with only 24% of providers automating the task. Claim payments had the lowest adoption rate for dental providers, with only 17% of providers automating this process.
Administrative Transaction Volume
While the volume of administrative transactions declined in 2020 due to the COVID-19 pandemic, it grew in 2021. The volume of transactions increased by 28% in the medical industry and 9% in the dental industry. However, electronic volumes accounted for the greatest share of total volume for both industries. Electronic volume rose by 30% for medical providers and 18% for dental providers.
Annual Spending on Administrative Transactions
Unfortunately, the increase in transaction volume was also accompanied by an increase in spending. In 2021, the US healthcare system spent $60 billion conducting nine common administrative transactions, indicating an $18 billion increase from 2020. The medical industry saw a 47% increase in spending, from $37.4 billion in 2020 to $55 billion in 2021, while the dental industry saw a 23% increase, rising from $4.4 billion in 2020 to $5.4 billion in 2021.
The highest spending increase was for claims submissions in the medical industry, which grew by 83%, and remittance advice in the dental industry, which grew by 43%. Higher volumes drove increased spending on eligibility and prior authorization transactions for medical providers. More than half of the spending increase was due to a 15% boost in the time it took for medical providers to complete transactions.
The Impact of Automation
Transitioning to electronic transactions could significantly reduce the cost of administrative transactions in the healthcare industry. The CAQH report found that the healthcare industry could save almost $25 billion, or 41%, by fully automating administrative transactions. These savings are in addition to the $187 billion that providers and health plans are currently saving due to previous automation efforts.
While the potential cost savings for the healthcare industry remained stable at $2.6 billion, the cost savings for the medical industry increased to $22.3 billion in 2021. These are significant savings that could be used to improve patient care and support other areas of the healthcare system.
The Future of Healthcare Automation
The Index report is encouraging, as it shows that the healthcare industry is continuing to become more automated and efficient. However, there is still work to be done. The report highlights the areas where further investment is needed, such as attachments in the medical industry and claim payments in the dental industry.
As the healthcare industry continues to evolve, it will be crucial for the cost savings for healthcare providers to remain stable at $2.6 billion. This indicates that there is significant room for improvement in the medical industry, particularly in areas such as eligibility and prior authorization transactions. Higher volumes drove increased spending on these transactions, with more than half of the spending increase due to a 15 percent boost in the time it took for medical providers to complete transactions.
The report’s findings underscore the need for continued investment in automation and efficiency within the healthcare industry. Although significant progress has been made in automating administrative transactions over the past decade, there is still a long way to go. The report notes that further investment is needed to ensure that healthcare business processes continue to become more automated and efficient.
The benefits of automation extend beyond cost savings. Automating administrative transactions can also improve the quality of patient care by reducing errors and improving the speed and accuracy of information exchange between healthcare providers and health plans. This can lead to faster claim processing and payment, which can be particularly important for patients who are dealing with serious illnesses or injuries.
The adoption of electronic transactions increased in 2021, but further automation of claims management processes could save healthcare providers nearly $25 billion annually. The CAQH Index report underscores the need for continued investment in automation and efficiency within the healthcare industry. Although progress has been made, there is still a significant opportunity for savings through further automation of administrative transactions. The potential cost savings are not only significant but can also improve the quality of patient care by reducing errors and improving the speed and accuracy of information exchange. The time is right for the healthcare industry to embrace automation and reap the benefits of a more efficient and cost-effective system.