The U.S. healthcare system racks up higher administrative costs than any other healthcare system in the world. Private health plans alone spend $158 billion on administrative costs each year, with average administrative costs per payer hovering around 17.8%.
Why do health plans spend so much on administrative functions? The shift to value-based payment—which ultimately could lower healthcare costs—requires an upfront investment to design, implement, and manage new reimbursement models. That said, the continued reliance on aging legacy systems also drives up costs: When human intervention is required to adjudicate claims, expenses rise. Failure to address paper-based processes (for example, claim payments, prior authorizations, and remittance advice) also keeps costs high.
How can health plans more effectively trim administrative costs without sacrificing member or provider satisfaction? Here are three steps to consider:
1. Push for electronic claims attachments
Ninety-six percent of healthcare claims from medical providers are submitted electronically, but 70% of claims attachments—like certificates of medical necessity, discharge summaries, consult notes, and operative reports—are sent via mail and fax. This increases the risk that protected health information could be compromised.
Additionally, these methods increase the risk of vital information being lost, which in turn slows claim processing and payment. Manually processed healthcare information raises the administrative burden for customer service teams, who must deal with multiple submissions of the same document when real-time acknowledgment of receipt isn’t in place. One regional health plan spends 792 hours per week processing attachments received by mail, fax or web portal.
One of the biggest hurdles to electronic attachment submission is that there has not yet been a federal standard established for claim’s attachment submission via an electronic data interchange. A 2019 environmental scan by the Council for Affordable Quality Healthcare (CAQH) found:
- 44% are waiting for regulatory direction before moving forward with electronic attachment submission.
- 23% are waiting for industry direction.
- 9% cited budget constraints as a reason for delay.
A proposed rule around electronic attachments is targeted for release in December 2019. In the meantime, there are ways that health plans can encourage providers to submit claim attachments through a web portal rather than by mail or fax, according to the CAQH:
- Eliminate ambiguity around the type of information needed—especially when uncertainty can lead providers to submit more information than required.
- Create real-time solicitations for attachments during the claim submission or prior authorization process.
- Launch pilot programs to accept claims attachments electronically using the following protocols: X12 275, DIRECT Messaging, HL7 FHIR and Clinical Data Repositories.
2. Look for ways to streamline prior authorization processes
Eighty-six percent of physicians contend that the prior authorization burden is high or extremely high, and 88% say prior authorization requirements have intensified in the past five years, according to an American Medical Association survey. Although a national standard for electronic submission of prior authorization requests exists (HIPAA Healthcare Service Review X12-278), providers have been slow to adopt this standard, according to the CAQH. Most physicians still complete prior authorization by phone or fax—a process estimated to take 16 minutes to complete.
But there is a strong business case for adopting electronic prior authorization. The CAQH study shows that when electronic prior authorization is employed, providers experience time savings of seven minutes per transaction. Meanwhile, health plans’ costs decrease from $3.50 to a few cents per authorization.
Many health systems are beginning to use web portals for prior authorizations, according to CAQH. Others are providing real-time telephone support for specialty authorizations, such as those related to precision medicine. For example, when health plans pair genetic counselors with physicians to review prior authorization requests for genetic tests, physicians gain on-the-spot education on why a specific test may not meet medical necessity requirements. They also receive guidance on the type of test that may be a better fit, given the patient’s medical needs history.
3. Seek opportunities to automate claims adjudication
A report by Accenture found health plans could significantly increase productivity and revenue through the use of intelligent automation. One approach to consider is to invest in solutions that auto-adjudicate claims using knowledge-based rules.
For example, an electronic data interchange gateway programmed with the health plan’s business rules and edits can standardize claims received from any source, from providers to clearinghouses. Once claims are standardized for processing, they can be auto-adjudicated by the health plan’s claim processing system according to the health plan’s medical policy. It’s an approach that eliminates manual processing of most claims and helps:
- Decrease the lag time between claim submission and acceptance
- Minimize the expenses ordinarily associated with claim submission and payment
- Simplify the claim standardization process
- Streamline administrative processes and reduce administrative cost
One approach to consider: Use auto-adjudication for all but the most highly complex types of claims, such as claims for genetic testing.
Given the pace of rising healthcare costs, now is the time for health plans to rethink business as usual and take bold steps toward cost transformation. Reenvisioning claims-related processes is an excellent place to start.
Tom Turi is Chief Payer Officer at The SSI Group (SSI). Tom joined SSI in 2015 as the General Manager of SSI Claimsnet, SSI’s solutions for payer facing solutions. Prior to SSI, Tom served as Executive Vice President of Comdata, and in senior management positions with Change Healthcare (formerly Emdeon), IBM Global Business Services-Healthcare Payer, PaySpan, National Processing Company and First Data.