The U.S. healthcare system spent $60 billion on administrative tasks last year, which is about $18 billion more than it spent in 2021, according to a new report from the Council for Affordable Quality Healthcare (CAQH).
The report examined the country’s annual spend on nine common administrative tasks in healthcare: eligibility and benefit verification, prior authorization, claim submissions, claim attachments, claim acknowledgements, coordination of benefits, claim status inquiries, claim payments and remittance advice.
The medical industry’s spending on these nine tasks increased by 47% in 2022, totaling $55 billion. The task with the largest increase in spend was claim submission, which saw a 83% jump. As for the dental industry, administrative task spending increased by 23%, resulting in a total spend of $5.4 billion. The task with the largest spending increase was remittance advice, which rose by 43%. Remittance advice refers to a payer’s explanation of a claim payment to a provider.
There are a couple reasons that the U.S. healthcare spend on administrative tasks increased so much last year, according to the report. The first is Americans’ increased utilization of healthcare services — many patients who deferred care throughout the pandemic began returning to their providers in 2022. There was a 28% increase in overall medical transaction volume and a 9% increase in overall dental transaction volume.
The second reason is healthcare’s workforce shortage. This has led to higher salaries for healthcare staff, which meant the cost of completing administrative tasks increased. The shortage also means that less experienced employees are being hired, and it takes them longer to complete administrative tasks because they lack relevant knowledge and skills, the report said.
The workforce shortage has also resulted in healthcare providers, such as physicians, having to complete administrative tasks instead of support staff. Since providers earn significantly higher wages, this made a noticeable impact on the healthcare industry’s spend on administrative tasks. Providers’ time spent on administrative medical tasks increased by 15%, which accounted for more than half of the increase in total spend, according to the report.
Despite the multibillion dollar increase in administrative task spend, the adoption of automation technology designed to streamline these tasks increased in 2022. Automation technology adoption improved for seven of the nine administrative tasks included in the report — it declined slightly for claim payment and remained stable for claim submission.
Of the nine tasks analyzed in the report, automation adoption was highest among acknowledgements and claims submissions. The attachments category has the lowest rate of automation adoption — just 24% of these tasks are automated in the medical industry, and 31% are automated in the dental field.
CAQH argued that the healthcare industry can save nearly $25 billion — 41% of the current annual spend of $60 billion — by transitioning to fully electronic administrative transactions. The organization also said the sector already saved $187 billion last year from the automation it did have in place.
Administrative waste is a issue that has plagued the healthcare industry for years. “Waste” refers to the fact that an excessive amount of time is spent on administrative tasks, even though they have no impact on patients’ health outcomes. This is not only frustrating for providers, but also incredibly expensive. A few years ago, Harvard University economics professor David Cutler estimated that the healthcare industry’s administrative costs account for twice the amount that the country spends on cardiovascular disease care annually and three times cancer care spend.
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