Healthcare administrative costs amount to $361 billion every year, and some of those expenses could be eliminated through standardization of coverage, claims processing, credentialing and EHRs, according to an article in the Nov. 15 issue of the New England Journal of Medicine.
Harvard economist David P. Cutler, PhD, and colleagues asserted that full implementation and compliance with the Patient Protection and Affordable Care Act (PPACA), Health Information Technology for Economic and Clinical Health Act (HITECH) plus standardized federal, state and market level reporting requirements could save providers $20 billion annually. Reducing administrative complexity could cut costs by $29,000 per year, per physician. It also would reduce the amount of time providers spend on administrative tasks from a current level of 43 minutes per day.
Using the examples of the banking industry and Walmart, the authors explained that in both cases, forced standardization increased efficiency and reduced costs. The Federal Reserve imposed standardization on the way banks communicate with each other electronically, and Walmart forced its vendors to comply with its computer standards. Enormous administrative streamlining occurred, and the authors claimed these results are transferable to the healthcare community.
Referring to the attempt at standardizing electronic claims under HIPAA, the authors opined that because the law was insufficiently detailed and implementation too slow, there was no effective standardization. However, they wrote that the PPACA's directive to set more detailed rules and the financial penalties it assesses for failing to adopt standardized procedures will prove more effective. Specifically, the authors estimated that if all providers adopted integrated electronic billing and administrative processes, savings to providers could reach $11 billion annually.
Cutler et al identified credentialing as an area that is ripe for standardization. The authors wrote that contracts between providers and health plans are "riddled with redundancy," and that the typical physician spends over three hours every year on credentialing applications (with staff spending an additional 20 hours per year, in the authors' estimation).
They pointed out that the U.S. Department of Health and Human Services (HHS) has the authority under PPACA to mandate a coordinated, nationwide credentialing system and to standardize provider/payer contracts, and that doing so could save providers more than $1 billion per year.
The authors noted that providers will not see optimal administrative cost savings as long as payers are able to request additional documentation to support claims. They pointed out that PPACA imposes more uniformity in claims attachments, but the authors advocated a broader mandate. The HHS secretary could expand the criteria that trigger financial incentives under HITECH to include standards for electronic transmission of administrative data, as well as clinical data. Doing so could save providers up to $2 billion annually, they asserted.
Administrative simplification on the scale the authors recommended is challenging because "the constituency ... is broad but diffuse," they wrote. The authors proposed establishing an office in HHS headed by a senior-level official to oversee implementation, innovation and compliance with efforts to standardize and streamline healthcare administration.