CAQH: Automating Administrative Transactions Cuts Annual Costs by $122B

Feb. 11, 2021
Electronic adoption of prior authorization transactions rose 8 percentage points from the previous year, saving the industry $9.64 per transaction

CAQH, a nonprofit multi-stakeholder healthcare organization, has released its eighth annual report measuring the progress made by healthcare payers and providers in automating administrative transactions. The 2020 CAQH Index found that, of the $372 billion widely cited as the cost of administrative complexity in the U.S. healthcare system, the industry could save $16.3 billion by fully automating nine common transactions. 

The 20-year-old CAQH describes itself as a venue where health plans, providers and other entities come together to solve industry-wide business challenges. Its report notes that the savings opportunity it identified is on top of the $122 billion in costs the healthcare industry has avoided already by streamlining some administrative processes.

Levels of automation have increased for both the medical and dental industries since CAQH’s 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, according to the organization’s report.

“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, in a statement. “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. The report 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 pinpointed opportunities for additional savings.

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.

The 2020 Index also revealed that the costs associated with some manual and partially electronic portal transactions are increasing. This may be because, as healthcare business needs become more complex, manual processes to accommodate them are becoming more labor intensive and expensive. This further suggests that 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. Electronic adoption of prior authorization transactions rose 8 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, in a statement. “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.”

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