The healthcare sector has been put under a global microscope due to the pandemic, but many businesses in the industry are facing revenue losses despite high demand for COVID-19 care and increased telehealth use. Consumers looking to reduce the spread of disease by avoiding public spaces have opted to delay optional treatments while government-led containment efforts required elective surgery providers to push off procedures, both of which have reduced income for some providers. The overall medical space is predicted to see its 2020 revenue come in 10 percent below last year’s.
Pressures like these are causing healthcare providers to focus on ensuring they can receive prompt payments from their insurance carrier and third-party claims processor partners. Respondents in a June survey of healthcare provider chief financial officers said they expected notable drops in revenue this year and that their firms would have to make reductions in spending. Most believed digitization of financial systems was important enough to their organizations to exempt them from belt-tightening, however, with only 12 percent of chief financial officers anticipating delaying or abandoning such plans. Medical organizations facing greater financial strain are likely to want to make their back-end operations as cost-effective as possible and encourage delivery of swift, digital payments.
Hospitals and clinics seeking payment for services rendered generally send claims to patients’ insurance plans, along with any additional documentation that may be helpful in explaining the procedures performed. These documents can include imaging scans, lab test results or other materials. Insurance carriers then review the claims to assess whether they are covered and then, if so, disburse the funds. Manual methods for exchanging information, following up on payment statuses and transferring funds can all add costs and delays. This Deep Dive examines the frictions of manual methods as well as the potential cost savings that could be reaped from digitizing them.
Information-Flow Frictions
A variety of information flows as healthcare providers submit claims and documentation and insurance plans deliver updates on payments’ statuses. Recent reports suggest that digitizing more of these processes could produce substantial savings. Many healthcare providers use digital methods for submitting claims, and the medical sector as a whole could see $507 million in spending reductions if all providers were to follow suit, according to a report investigating the state of B2B healthcare transactions. The study found that submitting claims manually often costs providers $3.30 per claim, with each taking six minutes to process. Sending the same claims electronically costs only 97 cents and takes just two minutes per claim, in contrast. Claims processors and insurance companies might offer web-based portals into which healthcare providers can upload claims documentation, for example.
Healthcare providers also might be able to trim costs by using swifter, less hands-on methods for transmitting the accompanying documentation. Only 20 percent of medical providers reported sending these details as electronic attachments in 2019, with the majority instead using fax or postal mail. Directing staff to manually track down and pair the documentation with the claims takes up more time for insurance companies’ AP teams as well as healthcare clinics’ AR teams. Sending all details together in a more automated, digital way could reduce important frictions, but there are some barriers. Researchers noted that a significant modernization hurdle is regulatory: There is no federally approved standard for properly delivering medical documentation through digital channels in a HIPAA-compliant manner, whereas there is such a standard for claims submissions. Healthcare and insurance providers are therefore often reluctant to take on the risk of automating these data exchanges.
Hospitals and health clinics spend time and money not only on delivering information to insurance carriers, but also when they seek to get information from those business partners. Healthcare providers are understandably concerned with ensuring that submitted claims get approved and that they are compensated for the work they have performed. They are likely to call insurance carriers to follow up about claims’ statuses, especially if they are uncertain whether the submission was received and whether the funds have been sent out. This can be a drain on both healthcare providers’ and insurance carriers’ time, however. Researchers estimate that the medical sector could save $2.2 billion and the dental industry could save $672 million by digitizing all claims status inquiries, for example.
Faster Payments
Insurance carriers have several options for disbursing funds for claims they have approved. Many use EFT systems, virtual cards or paper checks. The latter can be cumbersome for providers to receive, however, with medical professionals reporting that they must take an average of five minutes to process paper checks but just three to process digital payments. This could be one reason why digital transaction methods are popular in the space, with 70 percent of medical plans reportedly offering these options in 2019. There is still plenty of room for digital payments’ usage to be expanded in the medical sector to reduce costs, and researchers note that dental care payments in 2019 were still dominated by paper checks due to many providers’ senses of comfort around checks and struggles with managing EFTs. Digital solutions that can address these frictions can lead to easier transactions.
Healthcare providers are not the only ones that benefit from digital payment methods. Insurance companies may also find that using electronic methods enables them to avoid the costs attached to manual methods as well as get clearer visibility into payments’ statuses. This allows them to more easily answer healthcare providers’ questions, sparing both parties from time-consuming phone calls. Digital transaction tools further allow insurance companies to deliver plenty of information alongside the payments to explain which portions of the claimed expenses are being funded and why, thus heading off protracted back-and-forth disputes or at least reducing the length of these discussions.
Healthcare providers and insurance carriers may find paper checks and manual processes to be overly cumbersome when they are seeking to reduce costs and transact more smoothly. Embracing digital tools could help free up time and funds at a time when many businesses are more focused than ever on easing their budgets.