In 2018, David Cutler, a professor of economics at Harvard University, submitted testimony on administrative waste to the U.S. Senate Committee on Health, Education, Labor and Pensions. In his research, Cutler estimated that administrative costs account for twice what the U.S. spends on cardiovascular disease care annually and three times the spend on cancer care.
Cutler’s testimony illustrated a problem within the U.S. health system: administrative waste. This is caused by tasks that don’t discernibly contribute to health outcomes. Unfortunately, the issue of spending on administrative tasks – nonclinical costs of running a medical system – has continued to spiral out of control. A staggering 15 to 30 percent of total medical expenditures, upwards of $500 billion, now go to healthcare administration, half of which is wasted on unnecessary tasks.
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Eric Demers Eric Demers is the CEO of Madaket Health. He believes we can transform healthcare delivery through the power of data and interoperability. With more than 25 years of global healthcare experience, Eric has built and scaled leading technology and service companies, from early stage to Fortune 100. He is highly sought-after for speaking […]
The cost of care
Excess administrative costs come from a number of sources. A tangled web of payer networks each carry their own requirements, but all call for a number of proactively updated documents in order to remain in good standing with the payer for patient claims to be processed and paid. Current system backlogs for a number of payers mean correcting errors can take months, delaying payment and stifling cash flow. These backlogs also make it challenging to enroll in new payer systems, which can limit patient intake and growth.
Medical groups and practices also have a litany of requirements to ensure their providers are fully credentialed. Up-to-date paperwork is needed from individuals who practice, along with earning continuing education certificates on a regular basis. Tracking all these requirements is a challenge, and falling out of compliance with these tasks limits providers’ ability to practice and bill, which leads to longer waits for care and higher costs per patient.
Lastly, complex state-by-state licensing policies can be confusing even for full-time administrative specialists, a luxury many provider groups are unable to staff. Requirements shift often and vary greatly based on locality, particularly as the Covid-19 pandemic has evolved rapidly and left public health officials building policy reactively. Challenges become even greater for provider groups spread across multiple states, particularly for those practicing telemedicine or behavioral health. Virtual visits are an effective way to ease the overwhelming demand for patient care, but state licensing laws often present obstacles to delivering this care efficiently.
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While some of these costs are unavoidable, providers in the U.S. spend more on administrative expenses than comparable multi-payer systems. Waste occurs when coordination among many parties fails and complexity between insurers, benefits, plans, providers and procedures builds. Hospitals, physicians, clinics, private payers, public programs and other parties are all affected by the increasing health costs caused by wasteful administrative spending. Complex, manual tasks like enrollment, credentialing and licensing are bleeding money, increasing the cost of care and decreasing the quality.
The value of automation
It’s estimated that simplifying healthcare administration could save the industry $250 million. When done correctly, proven processes and automation technology can drive efficiency across the healthcare ecosystem and reduce costs, while ensuring physicians don’t fall out of compliance with a payer and can deliver patients the care they are seeking.
Unfortunately, the industry is plagued by a lingering old-school, siloed approach that traps data, made worse by antiquated systems that can’t work together to handle growing complexity. As a result, compliance shortfalls occur and a months-long process needs repeating, delaying income and keeping patients from critical services. Further, an administrative backlog builds, making it even harder for physicians to dedicate the attention needed to run a successful business.
Today, what’s required 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, credentialing, enrollment and more. The key is unifying the technology ecosystem for an easier way to get the business of healthcare done. Naturally, in doing so, doctors are freed from tasks to spend more time with patients, generating better outcomes and greater revenue.
Much of the same paperwork is required for licensing, credentialing and enrollment. Manually tracking and submitting the same materials for multiple deadlines in multiple silos isn’t just tedious, it’s shockingly inefficient and leaves far too much room for user error. And as outlined earlier, these errors can have catastrophic consequences for providers’ ability to both deliver care and receive payment. Keeping track of evolving payer requirements, for example, can be automated through the right system so provider groups aren’t surprised by urgent deadlines. For larger groups with thousands of providers, tracking individual certification deadlines can be streamlined, rather than counting on individual awareness. And for groups looking to expand to new payer systems or states, projects can be automatically managed and updated to make the process as efficient as possible.
Simplifying healthcare
Relieving physicians of tedious, inefficient administrative tasks begins by using software to automate the work. However, many healthcare providers employing software to automate administrative work rely on several platforms. This often means using one tool for insurance enrollment, another for credentialing, a third for licensing in every state you operate, and so on.
Therefore, for automation to be beneficial, it must be scalable and cover a lot of ground. Many existing tools perform one function very well, whether credentialing, licensing or enrollment. Doctors need to do all these tasks in the rev cycle, which requires the same information. Because of that, deploying a solution that completes many tasks at once is more beneficial for most providers. As automation services become increasingly popular, PDMs have surfaced to offer many, if not all of these options in a single repository.
Changing the system
Physicians know too well that in the U.S. healthcare environment, they must be administrators as well as clinicians. As the research from Professor Cutler shows, this administrative burden causes extensive waste, including trillions of dollars in revenue and countless hours of lost or deficient patient care.
Automation is a realistic and meaningful way to reduce care costs by making it easier for payers and providers to complete administrative work. Even so, reigning in administrative waste is no simple feat and requires buy-in from entities throughout the industry. As more realize the benefit of automation, expect a sea change to sweep through the industry and drive down spending.
Photo: Andranik Hakobyan, Getty Images
Eric Demers is the CEO of Madaket Health. He believes we can transform healthcare delivery through the power of data and interoperability. With more than 25 years of global healthcare experience, Eric has built and scaled leading technology and service companies, from early stage to Fortune 100. He is highly sought-after for speaking and consulting on international health, having advised global entities and governments on critical issues facing healthcare. A growth-minded leader, Eric has founded three companies and exited two. Eric previously served in strategy-focused executive roles at IBM, Accreon, MEDecision and Orion Health. He is a graduate of Brandeis University and The George Washington University School of Medicine and Health Sciences.
