How digitizing provider payments can slash health care waste

Health care providers today are grappling with rising operational costs and labor shortages as many provider practices, hospitals, and health systems are still reeling from the pandemic's financial and operational impacts. According to a new survey by Black Book Research, over 80% of industry respondents expect hospital and health system costs to rise by at least 15% in the next six months. But it’s not all doom and gloom; there are steps we can take as an industry to improve efficiencies and offset these challenges.

A significant opportunity for cost savings lies within administrative tasks, which often become burdensome and time-consuming. In the medical sector alone, CAQH reports administrative spending surged from $55 million in 2022 to $82.7 million in 2023. This increase places an additional load on small practices, where billing and claims processes often remain manual, cumbersome, and outdated. Despite some progress in health care administration digitization, there remains much to be desired compared to clinical advancements.

Digital transformation

The industry as a whole has made significant strides to increase digitization, but there is still more work to do. Much of the industry continues to leverage manual, paper-based workflows which contribute to significant administrative waste and negatively impact both the provider and patient experiences. This is only exacerbated by the current staffing shortage in health care.

The good news is that progress is possible. Modernizing systems and processes where unnecessary friction exists—from claims payments and data reconciliation to patient payments and communications—can deliver significant improvements for all. Removing the existing frictions within health care payments can reduce not just the administrative burden, but the cost associated with some of these complexities.

Admin spotlight: Payments

Let’s examine one administrative task as an example: claims payments. Although the industry is progressing toward electronic payment adoption, significant opportunity remains. Consider ACH, which is the prevalent standard. Even with a free ACH option, providers often need to navigate multiple portals and maintain a directory of passwords for all payers they interact with. A greater opportunity exists in solutions with singular payment streams that offer electronic provider payments and data together/in synchronicity. Consider with this method the time saved, the reduction in administrative burden and the increase in speed to get paid.

Beyond payments, practices must manage other administrative tasks, including scheduling appointments, verifying patient benefits, obtaining prior authorizations, submitting claims, and more. The benefits of digitizing these tasks can yield short- and long-term impacts. The current system of today, largely built in a fragmented manner, doesn’t optimally serve providers,payers or patients. But digitization benefits all parties by increasing efficiency and saving costs, and improving care, and new technology is being designed with the full ecosystem in mind.

Top benefits to modernizing administration

Save time to invest in other critical areas

Administrative workloads are escalating. The 2024 CAQH Index Report notes a 13% year-over-year increase in medical administrative transactions. Amid shrinking margins, inflation, and rising labor costs, it’s crucial providers maintain cash flow. Adopting modern solutions can expedite payments. Automating workflows can save three minutes per payment transaction and four minutes per ERA transaction, allowing providers to improve efficiency and dedicate more time to patient care.

Reduce burnout to protect valuable team members

The health care industry continues to face labor shortages in the post-pandemic recovery period, a trend likely to persist. A recent study from Mercer predicts a shortage of approximately 100,000 critical health care workers by 2028. This shortage leads to high workloads and burnout, with healthcare workers facing 2.2 to 2.9 times the risk of experiencing burnout due to work overload. Automating tasks can alleviate burnout, improve satisfaction, and support retention amid ongoing labor issues.

Save money to operate lean

CAQH found that manual tasks are increasingly expensive for medical practices, while electronic tasks are becoming less costly. This translates to a 12% cost-saving opportunity of $18.4 billion. For payments specifically, practices spent 13% more due to labor costs, despite a plateau in payment volume. As providers contend with rising operational costs and staff shortages, digitizing administrative work can have long-lasting positive effects on their bottom line.

Support patients to improve overall experience

By reducing inefficiencies and administrative waste, providers can offer quicker care with more attention to patients, minimizing delays and increasing positive outcomes. Cost savings also help avoid passing costs onto patients, keeping care accessible and affordable. Collectively, these improvements lead to greater satisfaction and retention of patient populations.

Providers dedicate years training in the delivery of care. Yet, the complexities of modern health care have overwhelmed them with growing paperwork, claims, payments, approvals, and other administrative burdens, detracting from their mission of care. By investing in resources to simplify these tasks, providers can refocus their time and talent on what matters most: their patients.

Yusuf Qasim is president of payments optimization at Zelis