Survey Finds Electronic Medical Claims and Billing Can Save Health Care Costs, Reduce Billing Errors

A study released by The PNC Financial Services Group, Inc., found that the health care industry’s reliance on paper to file and pay medical claims contributes to the high cost of health care, and industry-wide adoption of electronic claims remittance processing could improve efficiency, cut costs and reduce medical billing errors.

The survey of executives from U.S. hospitals, health systems and insurance companies further found that hospitals and health plans have the capability to file, process and pay medical claims electronically, but lack of standards continues to be a barrier to automation despite evidence that improved efficiency would eliminate extraneous costs and alleviate the hassles patients experience when covered claims are lost or denied.

“As consumers shoulder more of the cost of their own health care and demand greater transparency of pricing, market forces may make automated, electronic medical claims remittance processing a business imperative and competitive advantage,” said Paula Fryland, manager of PNC?s national health care group.

PNC conducted the e-Health survey to benchmark the current state of electronic claims remittance processing in the private health system, and to identify barriers to and opportunities for industry-wide adoption. Highlights of the findings include:

• 90 percent of hospital executives and 86 percent of insurance executives agreed that making the claims remittance process more efficient industry-wide would help slow the rising cost of health care.
• 85 percent of hospitals and 74 percent of insurance executives agree that the nation’s healthcare costs would actually decrease if health plans were required to publicly report the efficiency/performance of their claims filing and billing processes.
• 83 percent of insurance company executives agree that health plans should have to disclose information about the payment processes in the context of how these costs ultimately affect healthcare premiums.
• Half of hospital executives and four out of 10 insurance executives said their organizations could save at least $1 million and as much as $10 million a year if their billing and payment processes were more efficient.
• These savings could be used to improve patient care, according to 90 percent of hospital executives surveyed. Seventy-five percent said they would pass these savings directly to patients and two-thirds would use savings to provide care to more of the uninsured.

Claims Filing and Payment Inefficiencies Cited The majority of hospital and health plan executives surveyed said they consider their organization’s current billing and payment process to be highly efficient, yet the study showed there is significant room for improvement.

• On average, hospitals must submit a medical claim four times before it is paid in full. Health plans said they have to go back to providers. on average, six times to get additional information to pay a claim. Five percent of all insurance-covered medical claims are never paid.
• Nine in ten executives surveyed said they still use regular mail to send and receive claims and remittance information. Paper-based, back-up information is heavily relied on by both hospitals and health plans, particularly for payment and remittance advice.

Benefits of Electronic Claims Remittance Early adopters of electronic claims remittance process report significant tangible benefits:

• Eight in ten hospitals executives surveyed said cash flow has improved and they have realized significant cost savings.
• Roughly six out of 10 reported a reduction in bad debt levels.

While the direct financial benefits are less striking for health plans, six in 10 insurance executives cited a decrease in errors on balances owned, and eight in 10 noted fewer billing “hassles” related to coding and lost claims.

Industry-wide Barriers
When asked why they have not automated the claims remittance process, hospital executives point to requirement inconsistencies from multiple insurance companies, other demands for resources and electronic claims forms that provide insufficient data compared to paper-based forms. When asked the same question, insurance executives identify infrastructure cost, lack of financial incentives and difficulty quantifying a return on the investment as their greatest barriers to adoption.

Potential Solutions
“The crisis the U.S. health system faces is extraordinarily complex, and there is no easy button,” commented Fryland. “Different forms required by each insurance carrier and the demand for detailed back-up information has made health care organizations slaves to paper when they no longer need to be. It’s a barrier that can be overcome in an era of imaging technology, electronic data interchange and funds transfer, and the financial services industry will play an increasingly important role.”

Only half of insurance company executives surveyed by PNC were aware that financial institutions provide integrated payment remittance services for health care claims.