Healthcare Industry Could Save $9.4B with Full Adoption of Electronic Transactions

Jan. 13, 2017
The healthcare industry continues to make modest progress toward full adoption of electronic business transactions, but significant gaps remain, representing an opportunity for $9.4 billion in savings, according to new data from the 2016 CAQH Index.

The healthcare industry continues to make modest progress toward full adoption of electronic business transactions, but significant gaps remain, representing an opportunity for $9.4 billion in savings, according to new data from the 2016 CAQH Index.

The fourth annual CAQH Index measures adoption, costs and, for the first time, provider labor time associated with the most common administrative transactions conducted between health plans and providers. These include verifying a patient’s insurance coverage, sending and receiving payment, inquiring about the status of a claim and obtaining prior authorization for care. According to CAQH, the estimated potential savings from full industry adoption of electronic transactions grew by nearly one billion from what was reported in the CAQH Index last year ($8.5 billion).

This growth is due in part to including an additional transaction to the six that were previously measured, according to CAQH. Claims attachments, the added transaction, are used to send extra information required for some healthcare claims, such as discharge summaries or operative reports. Of note, 94 percent of claim attachments are currently submitted manually, which each cost nearly $6 more to process compared to electronic attachments. The collection of more precise data on cost savings for providers this year also contributed to the reported increase, according to CAQH.

According to the 2016 CAQH Index, increases in adoption of electronic transactions varied across transactions and ranged from one to eight percent. Fully electronic prior authorizations submitted to commercial medical health plans had the most accelerated growth in adoption, with an eight percent increase from the previous year.

Within the healthcare industry, each manual transaction, on average, costs U.S. health plans and healthcare providers approximately $3 more than each electronic transaction. This cost difference represents a significant savings opportunity, given the more than three billion manual transactions conducted annually between commercial medical health plans and providers.

Additionally, the CAQH Index data indicates that providers could gain 1.1 million labor hours per week by transitioning to fully electronic business transactions. Healthcare providers now spend 8 minutes, on average, and up to 30 minutes on manual tasks, which include making phone calls, sending faxes and mailing correspondence. Prior authorization offers providers the greatest time savings potential if conducted electronically, reducing the time per transaction from 20 to 6 minutes and the cost from $7.50 to $1.8, according to CAQH.

According to CAQH, a Washington, D.C.-based 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.

“Our organization understands the value of conducting business electronically and the greater efficiencies and cost savings realized through seamless data exchange. When we can reduce the amount of paperwork for our physicians and staff, more time and resources can be spent caring for patients,” Joseph M. D’Allaird, director of revenue cycle, a data contributor to the 2016 CAQH Index, from Cortland Regional Medical Center, said in a statement.

Two of the electronic transactions with consistently high rates of adoption over the past three years of CAQH Index reports for medical health plans and healthcare providers are claims status inquiries and eligibility and benefits verification. Advances in technology, as well as the development of industry standards and operating rules, have likely influenced and encouraged greater adoption. While use of these electronic inquiries rose by more than 5 percent, the corresponding volume of manual verifications has not declined as rapidly with participating health plans fielding more than 72 million telephone inquiries in 2015, according to CAQH.

The 2016 CAQH Index report also highlighted many of the barriers to adoption. Healthcare providers and health plans have cited the cost of initial implementation as a barrier to transitioning to fully electronic transactions. The report notes that some payers, including the Centers for Medicare & Medicaid Services, have begun requiring adoption of certain transactions as part of contractual agreements with providers. “Further application of this approach may be a useful strategy to rapidly drive adoption,” the report authors wrote.

Vendors play a role in driving adoption as well, the report notes, and there is anecdotal evidence that some vendors increase the cost for compliant systems or are not making data or infrastructure changes to systems on a timely basis. “This lag in functionality and increased cost likely results in providers’ slow adoption of electronic methods to interact with health plans,” the report authors wrote. 

CAQH also recommends that industry stakeholders expand best practices to increase adoption of electronic transactions and reduce utilization of manual transactions by accelerating industry- and government-led outreach and education for health plans, providers and their agents, including practice management system vendors.

The findings from the 2016 CAQH Index are based on voluntary nationwide surveys of providers, as well as commercial medical and dental health plans. Participating medical health plans represent over 140 million covered lives—nearly 46 percent of the commercially insured U.S. population—and 5.4 billion transactions conducted in 2015.

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