Automation could cut $13.3 billion from health care spending

Automation concept collage In the medical area, the greatest opportunities for savings were in the areas of eligibility and benefit verification. (Photo: Shutterstock)

The U.S. health care system could save $13.3 billion annually by increasing the use of automation of business transactions, a new analysis finds.

The study was published by CAQH, a nonprofit alliance of insurers advocating more efficient business practices in health care, and is the group’s seventh annual look at progress in streamlining administrative functions.

Related: 4 recommendations for combating health care’s high administrative costs

The CAQH Index said that of the $350 billion dollars spent annually on administration in U.S. health care, $40.6 billion is spent on eight administrative transactions. The report added that the health care industry could save $13.3 billion, or 33 percent what is spent currently, by moving to fully electronic processes.

“While a greater percentage of business transactions are now conducted electronically, the U.S. continues to spend more on health care administration than any other nation,” said Kristine Burnaska, Director of Research and Measurement at CAQH. “The Index offers a roadmap for those areas where further automation can drive down costs and burdens for both providers and plans.”

Widely acknowledged waste

The study echoes some of the findings of a major report from JAMA last October, which said that up to 25 percent of health care spending in the U.S. is wasteful. “The estimated waste is at least $760 billion per year,” said a New York Times analysis of the JAMA study. “That’s comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.” That study also identified administrative costs as a major area of wasteful spending.

The CAQH Index tracks electronic administrative transactions, including verifying insurance coverage; obtaining payment authorization for care; submitting a claim and supplemental information; and sending and receiving payments. The report also estimated the annual volume of these transactions, their cost, and staff time needed to complete the work.

The study analyzed levels of automation, spending and savings opportunities for eight administrative transactions: eligibility and benefit verification, prior authorization, claim submission, attachments (documentation included in medical records), coordination of benefits, claim status inquiry, claim payment and remittance advice.

In the medical area, the greatest opportunities for savings were in the areas of eligibility and benefit verification (the report estimated the industry could save more than $4 billion), claim status inquiry ($2 billion), and remittance advice ($1.8 billion).

For the dental industry, the report found that the greatest savings were possible in the areas of eligibility and benefit verification ($978 million), remittance advice ($800 million), and claim payment ($780 million).

Report recommendations

The CAQH report takes an in-depth look at each of the categories mentioned above, and comes up with a list of recommendations for the industry:

  • Focus efforts to reduce provider burden—the report says providers could save time and money by fully automating administrative functions.
  • Accelerate standards and operating rule development—the report recommends standardizing rules and enabling greater administrative and clinical interoperability.
  • Expand research related to the administrative workflow–including additional research on the challenges of adopting more efficient practices.

“While the industry has reduced administrative complexity by automating fee-for-service processes, our health care system is evolving,” said April Todd, Senior Vice President, CORE and Explorations at CAQH. “As the industry transitions to value-based payment models, and the need for interoperable administrative and clinical systems becomes more acute, we need to adapt in order to maintain and improve upon the progress made to date.”

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