Healthcare can Save Billions by Automating Admin Transactions

Costs for electronic processing have decreased as costs for manual and partially electronic transactions have increased, resulting in opportunities to save $16.3 billion in the future.

The Council for Affordable Quality Healthcare, Inc., or CAQH, recently released their eighth annual providers and payers report, 2020 CAQH Index, which found of the $372 billion widely cited as the cost of administrative complexity in the U.S. healthcare system, the industry can save $16.3 billion by fully automating nine common transactions.

This savings opportunity is on top of the $122 billion in costs the healthcare industry has avoided by streamlining administrative processes, according to the report. Levels of automation have increased for both the medical and dental industries since the last report, while the opportunity for further savings has also risen by $3 billion annually. This is largely due to a drop in costs for automated processes and higher costs for manual and partially electronic portal processes alongside increasing volumes.

“This year’s report found that adoption of electronic processes generally increased across the medical and dental industries,” said Kristine Burnaska, director of Research and Measurement at CAQH. “The data also indicates that future efforts to automate could yield even greater returns.”

The CAQH Index tracks automation, spending and savings opportunities for administrative transactions related to verifying patient insurance coverage and cost sharing, obtaining authorization for care, submitting claims and supplemental information and sending and receiving payments. It also categorizes transactions by whether they are fully automated, partially electronic or manual. The 2020 Index collected data from health plans and providers through the 2019 calendar year and thus excludes the impact of COVID-19 on healthcare administrative transactions.

While the industry has already avoided $122 billion annually by automating these transactions, up $20 billion from last year, the Index found opportunities for additional savings.

One opportunity, for example, each fully automated claims status inquiry costs $11.71 less than the same transaction conducted manually for the medical industry and $10.92 less for the dental industry. Similarly, every eligibility and benefit verification converted from manual to electronic saves the medical industry $8.64 and the dental industry $8.75. Considering the millions of times these transactions occur every day, the savings potential across the healthcare economy is significant.

In addition, the report revealed the costs associated with some manual and partially electronic portal transactions are increasing. This is possible because, as healthcare business needs become more complex, manual processes to accommodate them are becoming more labor intensive and expensive, the report said. This further suggests updates are needed to electronic transactions to address increasingly complex business needs that are today being addressed outside of the standard transactions.

Prior authorization achieved the greatest year-over-year progress, although it continues to be conducted manually more often than any other transaction, according to the report. Electronic adoption of prior authorization transactions rose eight percentage points – more than any other transaction studied – saving the industry $9.64 per transaction.

“The results of the 2020 CAQH Index are encouraging,” said April Todd, senior vice president of CORE and Explorations at CAQH. “The data shows that the opportunity to build on past progress – and achieve additional savings that payers and providers can invest in patient care, innovation and expanding access in communities across the country – is significant.”

To read the full 2020 CAQH Index, click here.