We all know there is administrative waste in healthcare, but to lay it all out, here’s the shorthand math:
In 2019 the national cost of healthcare is expected to total $3.24 trillion. Healthcare spending is expected to hit $6 trillion in 2027 — it’s growing faster than GDP.
$262 billion in healthcare insurance claims are denied each year. These end up being worked or written off by healthcare providers, which wastes time and carries a significant cost. To work a denied claim it costs roughly $118 per claim.
For every ten physicians providing care, seven additional people are needed to manage billing. There are 137,000 codes in ICD-10, and the average hospital uses three or more systems to manage their revenue cycle.
Administrative complexity makes up 25% of all healthcare spending. A quarter of healthcare spending, to the tune of $266 billion annually, is waste.
The volume of healthcare claims, denials and patient payments is continuing to grow, so concurrently, the manpower it takes to manage denials and patient payments is growing. Healthcare payments have become a complex, massive and waste-ridden problem.
What has been the solution? Throw more bodies at the problem.
While adding more people and making more phone calls is necessary to a certain degree, adding more people to do more work will not solve the problem. More bodies is a duct tape solution; it’s completely unsustainable.
Healthcare providers need tools that give them better insights into their payments and help them prioritize and focus their collection efforts, in both denials and patient payments. Providers can’t be chasing dollars — working denials that will never be paid. They can’t be calling the wrong patients, wasting precious time on patients who will never pay their bills.
We are nearing a tipping point where government regulation, consumer/patient demands and insurance payer complexity will make it essential that providers innovate within the revenue cycle. Healthcare providers will have to implement automated processes and AI to keep up. Not only to recover more dollars, but to manage the ever-growing administrative burden.
With our massive spend on healthcare, the pressure to build margin and a push towards value-based care, AI will become an integral part of the revenue cycle, as well as a driver of operational strategies (think utilization). The most forward-thinking healthcare organizations have already started moving in this direction.
2020 is a great year to lay the groundwork for AI in the revenue cycle — we can’t keep throwing bodies at the problem.
