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Healthcare Providers, Health Plans Could Save $8.5B Annually by Electronically Processing All Transactions

March 31, 2016
by Heather Landi
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Transitioning from manual to electronic processes for administrative transactions between healthcare providers and health plans could save the U.S. healthcare industry $8.5 billion annually, according to the 2015 CAQH Index Report.

In 2014, there were 16 billion administrative transactions between commercial health plans and healthcare providers, with about 20 percent of those transactions processed manually. Of the 16 billion, health plans processed an estimated 900 million manually in 2014, and another 2.5 billion were conducted manually by healthcare providers. If the industry were to adopt electronic processes for these manual transactions, the annual savings is estimated to be $1.7 billion for health plans and $6.8 billion for healthcare providers, according to the CAQH Index Report.

Despite steady increases in the industry adoption of Health Insurance Portability and Accountability Act (HIPAA) electronic administrative transactions, the report emphasizes a remaining opportunity to save more than $8 billion each year.

The CAQH Index report is an annual report that measures adoption rates, cost, and savings associated with the shift from manual to electronic business HIPAA transactions between health plans and healthcare providers.

According to CAQH, a non-profit alliance with the aim of creating shared initiatives to streamline the business of healthcare, by some estimates, more than $31 billion each year is spent by healthcare providers alone 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.

The report finds the average rate of adoption of fully electronic transactions varies significantly among the measured transactions: Claim submission—93.8 percent; Eligibility and benefit verification—70.5 percent; Claim payment—61.4 percent; Claim status inquiry—56.5 percent; Remittance advice—49.6 percent; Coordination of benefits (COB) claims—48.7 percent; Prior authorization—10.2 percent and Referral certification—6.2 percent.

The 2015 CAQH Index is the third annual report and an analysis of trends from 2012 through 2014 for the six transactions originally studied shows that substantially more transactions were conducted electronically in 2014 than in previous years. As in previous reports, the 2015 Index found significant, unnecessary costs resulting from large volumes of manual transactions that could be handled electronically, according to the CAQH Index Report announcement.

Eligibility and benefit verifications and claim status inquiries are far less costly when conducted electronically, offering a huge savings opportunity for health plans and providers, according to the CAQH Index report. “The use of fully electronic transactions is increasing, but in 2014 responding health plans still reported over 120 million transactions in which representatives of the health plans and healthcare providers connected telephonically to complete the transaction,” the report authors wrote.

Healthcare providers alone could save more than $5 billion annually by using automated processes to check patients’ eligibility and benefits.

And, the CAQH Index report notes that the direct labor cost per transaction continues to vary considerably across transactions and methods.

Manual transactions are far more costly than electronic transactions, particularly for healthcare providers. On average, manual transactions each cost providers and health plans approximately $2 more than each electronic transaction, the report stated.

The 2015 CAQH Index Report also provides an industry call to action to facilitate more rapid adoption of electronic transactions. Specifically, the CAQH Index calls on the healthcare industry to “share and expand best practices to increase adoption of electronic transactions and reduce utilization of manual transactions among industry stakeholders by accelerating industry- and government-led outreach and education for health plans, healthcare providers, and their agents, including practice management system (PMS) vendors.”

The report also calls on industry stakeholders to evaluate the sufficiency of current government regulations and federal strategic plans to support broad adoption of fully electronic transactions for health plans, healthcare providers, and their agents and increase targeted government- and industry-led efforts to reduce adoption barriers for health plans and healthcare providers, including consideration of financial incentives and contractual requirements.

And, the CAQH Index Report recommends that the industry improve uniform and systematic tracking and reporting of adoption, and related cost savings, by healthcare providers, health plans, and their agents.

According to the CAQH Index report, participating health plans represent over 118 million covered lives—nearly 45 percent of the commercially insured U.S. population—and more than 4 billion claims-related transactions conducted in 2014. The 2015 CAQH Index includes several notable enhancements. Specifically, the Index now analyzes adoption rates for coordination of benefits (COB) claims and referral certifications. It also includes data from the dental industry, representing over 92 million covered lives and 440 million transactions—over 40 percent of the U.S. population with commercial dental insurance.




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