April 29, 2024

Healthcare Administrative Expenses Increased 2x

As the pandemic gradually recedes from the forefront of our collective consciousness, its lasting impact continues reverberating throughout healthcare administration.

The 2023 CAQH Index report revealed a 50% uptick in healthcare administrative expenditure.

What has fueled this rise?

Staffing issues, hybrid workflows, and cyber threats, to name a few.

The impact of ‎staff shortages has been profound, elongating the time required to complete essential tasks and thereby driving up administrative costs. Additionally, cyber threats have posed a significant challenge, necessitating increased spending on security measures and response mechanisms to counter and recover from malicious agents.

What the Statistics Say

The 11th CAQH report highlights a staggering $89 billion spent on administrative transactions, encompassing medical ($82.7 billion) and dental ($6.3 billion) sectors. These figures underscore the challenging circumstances within the medical industry, revealing a stark 50% surge in expenses compared to last year.

The leading factor behind the escalation is a 71% surge in claim status inquiries, constituting 15% of the overall annual expenditure. Healthcare providers grappling with heightened volume and workforce challenges reported spending an average of 24 minutes on manual claim status inquiries, translating to approximately $12 per transaction. However, a contrasting trend emerged within the dental industry, where spending decreased by 15% as providers conducted fewer inquiries, thanks to the quicker payments facilitated by plans.

Moreover, persistent staffing issues, often stemming from burnout, retirement, and turnover, have significantly prolonged the time providers spend on administrative tasks, accounting for 75% of the rise in total spending.

Prior authorization remains a significant burden for providers, taking an average of 11 minutes electronically and 16 minutes via a portal for each authorization — with longer times for new or less experienced staff. Specialists and behavioral health providers are particularly affected by this tangled process due to the complexity of their services.

While automation has alleviated the administrative burden, the escalating prevalence of cybersecurity threats against hospitals and health systems necessitates additional resources like investment in new servers and maintenance. In the first half of 2022, 337 data breaches impacted 19,992,810 individuals, with Anthem Inc. suffering a massive healthcare breach, compromising 78.8 million private records.

The Shift Towards Electronic Processes: Trends and Cost-Efficiency

The healthcare industry is advancing towards automating routine transactions, with claim submissions nearing a threshold of 98% in the medical sector and electronic eligibility and benefit verification achieving 94%. Additionally, there has been a slight increase in electronic claim status inquiries in the medical and dental sectors, with the dental industry exhibiting consistent growth over the past five years.

However, the electronic adoption of coordination of benefits decreased to 90% (medical industry) due to less frequent changes in coverage, leading to a reduced need for coordinating benefits.

According to the CAQH reports, the average cost per electronic transaction was approximately $3 less than manual methods. In 2022, despite the increase in spending, the healthcare industry saved $193 billion by automation. However, CAQH estimates that transitioning from manual and partially electronic transactions to fully electronic transactions could result in an additional annual saving of $18.3 billion. Indeed, electronic transactions still hold significant untapped potential to further enhance efficiency gains and cost savings within the healthcare sector.

The New Normal: Electronic Administrative Transactions

Fully automated workflows are becoming the new standard in the healthcare industry. Emerging technologies like machine learning and artificial intelligence (AI) can enhance efficiency and save time.

However, as technology advances, so do the accompanying AI, cybersecurity, and phishing threats. These threats can potentially disrupt systems and impede progress. Healthcare systems must proactively anticipate and address these challenges when automating workflows to minimize disruptions in patient care.

Furthermore, as physician burnout escalates to critical levels, collaboration is paramount in identifying solutions and best practices to save time, enabling providers to dedicate more time to patient care. Online educational resources, discussion forums, training sessions centered on administrative transactions, and orientations for new staff can facilitate smoother integration and improve productivity.

Glenwood offers comprehensive solutions to streamline your practice's workflow with our integrated EMR and RCM system (GlaceEMR & GlaceRCM). We prioritize data security by implementing top-tier encryption measures. Our data center proudly holds SAS 70 Type II certification, while our server farm actively employs an enterprise-grade firewall and intrusion detection/prevention system to ensure robust security.

Don't compromise with your practices' efficiency and security. Seamlessly transition to the new normal and take control of your administrative expenses. Contact us today to learn how our solutions can benefit your practice!

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