In 2018, David Cutler, an economics professor at Harvard University, testified about administrative waste before the US Senate Committee on Health, Education, Labor and Pensions. In his study, Cutler appreciated that administrative costs represent twice what the US spends on cardiovascular care annually and three times what it spends on cancer care.
Cutler’s testimony illustrates a problem in the US health care system: administrative waste. This is due to tasks that do not appreciably contribute to health outcomes. Unfortunately, the issue of administrative costs—the nonclinical costs of running a medical system—continues to spiral out of control. A staggering 15 to 30 percent of total medical expensesover $500 billion now goes to the health care administration, half of which is wasted on unnecessary tasks.
The cost of care
Redundant administrative costs come from a number of sources. Each tangled web of payer networks brings its own requirements, but all require a number of proactively updated documents to remain in good standing with the payer in order for patient claims to be processed and paid. Current system backlogs for a number of payers mean errors can take months to correct, delaying payments and stifling cash flow. These backlogs also make it challenging to enroll in new payer systems, which can limit patient enrollment and growth.
Medical groups and practices also have a set of requirements to ensure their providers are fully accredited. Up-to-date documentation is required from practitioners along with regular receipt of continuing education certificates. Keeping track of all these requirements is challenging, and failure to meet these tasks limits providers’ ability to practice and bill, resulting in longer waits for care and higher costs per patient.
Finally, complex country-by-country licensing policies can be confusing even for full-time administrative professionals, a luxury that many provider groups cannot afford. Requirements change frequently and vary widely by location, especially since the Covid-19 pandemic has developed rapidly and prompted public health officials to build policy reactively. The challenges become even greater for provider groups spread across multiple states, especially those practicing telemedicine or behavioral health. Virtual visits are an effective way to alleviate the overwhelming demand for patient care, but state licensing laws often present barriers to the efficient delivery of this care.
While some of these costs are unavoidable, US providers spend more on administrative costs than comparable multi-payer systems. Waste occurs when coordination among many parties fails and complexity between insurers, benefits, plans, providers, and procedures piles up. Hospitals, doctors, clinics, private payers, public programs and others are affected by rising health care costs caused by wasteful administrative costs. Complex, manual tasks such as enrollment, credentialing, and licensing waste money, increase the cost of care, and decrease quality.
The value of automation
It is believed that the simplification of administration in health care could saving the industry $250 million. When done right, proven processes and automation technology can drive efficiency in the healthcare ecosystem and reduce costs while ensuring that physicians don’t fall out of payer compliance and can provide patients with the care they seek.
Unfortunately, the industry is plagued by a lingering old-school, siled approach that captures data, exacerbated by outdated systems that cannot work together to handle increasing complexity. As a result, compliance gaps occur and a months-long process needs repetition, delaying revenue and keeping patients from critical services. In addition, an administrative backlog builds up, making it even more difficult for physicians to devote the attention needed to run a successful business.
What is required today is an all-in-one, administration-specific data management platform (DMP). Purpose-built, integrated and fully connected across operations, these platforms can automate and facilitate compliance, licensing, credentials, enrollment and more. The key is unifying the technology ecosystem for an easier way to do healthcare business. Naturally, this frees up doctors to spend more time with patients, generating better results and more revenue.
Much of the same documentation is required for licensing, certification and registration. Manually tracking and submitting the same materials for multiple deadlines across multiple silos isn’t just tedious, it’s shockingly inefficient and leaves too much room for user error. And as previously stated, these mistakes can have catastrophic consequences for providers’ ability to deliver care and get paid. Tracking changing payer requirements, for example, can be automated through the right system so provider groups aren’t caught off guard by urgent deadlines. For larger groups with thousands of suppliers, tracking individual certification deadlines can be streamlined rather than relying on individual awareness. And for groups looking to expand to new payer systems or countries, projects can be automatically managed and updated to make the process as efficient as possible.
Freeing physicians from tedious, inefficient administrative tasks begins with the use of work automation software. However, many healthcare providers who use software to automate administrative work rely on multiple platforms. This often means using one tool for insurance enrollment, another for credentialing, a third for licensing in each state you work in, and so on.
Therefore, for automation to be useful, it needs to be scalable and cover a lot of ground. Many existing tools perform one function very well, whether it’s authentication, licensing, or enrollment. Physicians must perform all these tasks in the turnover cycle, which requires the same information. Therefore, implementing a solution that performs many tasks at once is more beneficial for most vendors. As automation services have become more popular, PDMs have emerged to offer many, if not all, of these options in a single repository.
Physicians know all too well that in the American health care environment they must be both administrators and clinicians. As Professor Cutler’s research shows, this administrative burden causes enormous losses, including trillions of dollars in revenue and countless hours of lost or inadequate patient care.
Automation is a realistic and meaningful way to reduce the cost of care by making it easier for payers and providers to handle administrative work. Even so, managing administrative waste is no simple feat and requires support from entities across the industry. As more realize the benefits of automation, expect a sea change to sweep the industry and drive down costs.
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