Healthcare companies do more electronically, but there’s room to improve, study finds

Providers are still spending more money than they should in submitting claims and prior authorization, according to the new CAQH Index. The industry could save billions by moving toward more automation, the group says.

Healthcare providers are making progress in managing administrative processes electronically, but they can do more to save time and money, according to a new report.

The Council for Affordable Quality Healthcare (CAQH) has released its annual report, the 2021 CAQH Index, which outlines the way payers and providers are handling more processes electronically. CAQH, a group based in Washington, D.C., aims to streamline healthcare costs.

Healthcare companies need to continue moving from manual processes in a host of administrative tasks. The healthcare industry could save $20 billion by handling 9 common transactions electronically, CAQH says.

Overall, CAQH found the adoption of electronic transactions for common administrative tasks rose by 2.3%, on average, in 2021. The COVID-19 pandemic is undoubtedly driving much of that shift, said April Todd, a senior vice president for CAQH.

“When we were doing the study, and following up with the providers, what we heard from a number of them, with the health plan staff and the administrative staff of providers, they were working from home,” Todd said in a phone interview.

“That led to a reduction of these manual processes due to the sheer need to adapt,” she added.

The report found a decline in volume in administrative transactions in 2021, with medical transactions dropping by 11% and dental transactions falling by 3%. The report said the drop reflects the impact of the COVID-19 pandemic on healthcare policies and patient behaviors. Some patients have been delaying some healthcare needs during the pandemic.

Yet even with providers handling fewer transactions, healthcare companies were spending more money to deal with new code requirements or to ensure patient information was handled correctly. The amount of medical spending rose to $37.4 billion, a 12% increase.

“We anticipated volume was going to be down,” Todd said. “We anticipated that would lead to costs going down. We were surprised that spending had gone up.”

Some manual processes were more complex and costly because the pandemic generated new challenges, such as providers seeking reimbursement for COVID-19 costs and the increased use of telehealth.

“Even though there were fewer of them, manual transactions became extremely expensive,” Todd said.

Some processes, such as submitting claims and verifying benefit eligibility, are typically handled electronically.

However, prior authorization is one administrative function that is lagging behind. With prior authorization, healthcare providers contact insurers or other payers to see if certain drugs, treatments or services are covered.

The new report found only 26% of prior authorization requests are handled fully electronically. On the upside, it does represent an increase from 2020, when only 21% of authorizations were fully electronic.

The report found 39% of prior authorizations were partially electronic in 2021, while 35% were still fully manual, meaning they were submitted by phone, fax, email or mail. If all prior authorization claims were submitted fully electronically, the healthcare industry would see a savings of $437 million annually, CAQH estimated.

Todd said the gains in electronic usage for prior authorization are encouraging.

Prior authorization requires clinical documentation, but without national standards for documentation in electronic processes, healthcare companies have been reluctant to make the investment and transition, Todd said.

Doctors and other healthcare providers have long said prior authorization is overly burdensome, takes time away from patient care, and leads to stress and burnout. The American Medical Association and the Medical Group Management Association have pushed for reforms of the prior authorization process.

The federal government has adopted regulations pushing healthcare companies to exchange information more freely. As the industry moves toward increased interoperability, some of the time and costs in administrative processes should decrease, regulators say.

The report also found dental providers, which have long lagged behind medical groups in automating some administrative functions, are starting to make some progress, Todd noted.

“It was nice to see the dental industry make progress across the board,” Todd said.

Healthcare organizations may found it daunting to shift to more automation in administrative functions, but it can reduce stress, particularly for providers dealing with staff shortages, Todd said.

"We've learned during the pandemic, the more we can make electronic, the easier everyone’s lives will be, particularly on the provider side," Todd said.

The report broke down how common administrative tasks were handled. Some highlights.

Eligibility: 89% of medical inquiries regarding benefits or coverage associated with a plan were handled fully electronically, up from 84% in 2020. If all eligibility and benefit verification was handled electronically, the industry would save more than $10 billion annually, CAQH says.

Claims status: This is one area where there was actually a decline in fully electronic transactions. CAQH says 68% of inquiries of the status of claims were handled fully electronically in 2021, down from 72% the previous year. The healthcare industry would save $3.8 billion if claims status inquiries were handled electronically, the second biggest opportunity for cost savings in automation, CAQH says.

Claims submission: 97% of medical claims are submitted electronically, while 84% of dental claims are handled through automation. Even though the bulk of medical and dental claims are fully electronic, CAQH says the industry would save $1.9 billion annually by submitting all claims electronically.

Attachments: Healthcare providers often must submit attachments with claims or prior authorization to explain the need for a treatment or service. The vast majority of these attachments are submitted manually. For both medical and dental groups, roughly 1 in 5 attachments are handled fully electronically.