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    Five ways to reduce healthcare administrative costs


    Administrative costs make up about 15% of all healthcare expenditures—well over $300 billion annually, according to the 2016 index report from the California Association for Healthcare Quality. Outdated, manual processes and rejected claims eat up a large portion of this cost.

    The key to reducing administrative costs lies in refining these processes and changing with the times, according to industry leaders.

    Here are five strategies to consider implementing at your organization.

    Strategy #1: Digitize processes, verify benefits

    One of the biggest drains on healthcare is the administrative cost associated with the revenue cycle. Minor mistakes associated with benefit verification, denial management, and claims resubmission can become very costly.


    Greg Snow, vice president of provider portfolio strategy at the healthcare IT company Availity, says when a mistake is made in the revenue cycle, it affects the entire process. And, even if efficiency improvement opportunities are identified at the back end, there often isn’t a good feedback mechanism to make changes to clinical functions at the front end.

    When it comes to billing, coding, and getting paid, Snow says 48% of denials come from the patient access point. For example, a staff member fails to verify the benefit levels or insurance coverage. This problem is compounded by the new class of underinsured patients created over the last several years that may only have benefits covering preventive or outpatient services, he says. Often, these patients don’t pay for uncovered services, which leads to lost revenue or higher costs due to collection attempts.

    “It’s a lot of little stuff that doesn’t seem like much at the time it’s occurring, but it’s a big deal,” Snow says. “Only about 76% of all providers verify insurance coverage and benefits electronically.”

    But electronic benefit verification is critical. It can help health systems recover more revenue and save money, Snow says. Electronic benefit verification costs about 49 cents per patient. Manually, the cost is more than $8, he says. To provide some scope, Snow says there were about 72 million benefit verifications done manually last year alone.

    When rethinking your collection strategies, Snow suggests aiming to reduce denials first. Make changes to front-end processes to eliminate errors that result in denials, since amending and resubmitting claims can cost $25 a pop. “You have the products, you have the services, you have the tools,” he says. “You have to educate people that there aren’t a hundred ways of doing things. There are a finite number and you have to make that process as efficient as you can.”

    Strategy #2: Streamline physician work flow

    Happy workers make successful workplaces, and it goes without saying that recent changes in healthcare have increased the administrative burden on clinicians. Helping them streamline their work flow will increase efficiencies and savings, says Jay Anders, MD, chief medical officer at Medicomp Systems, a medical device manufacturer and developer.

    “Ask any physician now using an EHR and they would say their administrative burden has increased three-fold,” Anders says.

    That’s why looking for EHR efficiency improvements is a good place to begin when seeking to reduce administrative costs. Physicians are more productive if they aren’t bogged down in the system, says Anders.

    This is exactly what Phoenix-based Phoenix Children’s Hospital found when it started using a software plug-in that optimized the clinical charting process.  The plug-in improved work flow and allowed physicians to see 30 percent more patients, says Anders.

    The plug-in takes the history, physical, and assessment data entered by the physician, reviews the patient’s previous medical record, and helps the clinician formulate a clinical decision. Then, it populates a note within the EHR. The program also takes data from the physician’s note and converts diagnoses directly to billable codes

    Physicians and other caregivers are a great resource for finding ways to streamline the processes that are a drain on their time and resources, says Anders. “For so long, a lot of people have ignored them,” he says.  “… No one has asked them if there is anything they can do to make it better for them. Listen to the people who do the work.”

    Next: Strategy #3


    Rachael Zimlich, RN
    Rachael Zimlich is a freelance writer in Cleveland, Ohio. She writes regularly for Contemporary Pediatrics, Managed Healthcare ...


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