According to an estimate by the well-regarded CAQH Index, one-third of spending on healthcare administrative transactions could be cut through fully electronic processing. As an example, only half of remittance advices are completely electronic. CAQH recently issued its latest Index update and increased the total savings estimate to 42%, or $16 billion in aggregate.1 Two areas where considerable opportunity exists to reduce spending through automation are in receivables and payables.
This article delves into the subject and evaluates key trends sparking urgency. It also highlights solutions that offer rapid and substantial benefits, as well as critical success factors that all organizations should consider on the automation journey.
Automation: Room for Growth
Financial processes in healthcare continue to be largely executed manually, on paper, and using multiple, non-integrated information systems. A 2019 survey of healthcare financial leaders found only 20% have fully digitized or automated more than a fourth of their financial and revenue cycle operations.2
An important observation is that many health systems, hospitals and physician groups include the use of business software tools such as spreadsheets, a limited form of automation at best, in their calculations.
Industry Forces Driving Need for Automation
Three powerful forces are reinforcing the need for all providers to pursue the benefits that accrue from automation. (Figure 1)
- A major emphasis on the patient financial experience. Manual financial processes frequently trigger frustrations among patients, which runs counter to rising “consumerism” and demands for greater convenience. Improving the patient financial experience is a priority for healthcare providers, with automation as a central strategy.
- Shift to value-based care. Migration to value-based reimbursement models, such as managed care and shared savings, shifts risk to providers and places downward pressure on margins. Operating more efficiently becomes imperative, necessitating sharp focus on improving processes and workflows.
- Growing competition. A host of non-traditional healthcare providers have emerged in recent years. Many are well-capitalized companies with considerable technological capability to deliver efficient, consumer-friendly services. Health systems, hospitals and physician practices must attain higher levels of efficiency and convenience at all stages of the patient journey to compete effectively with these new entrants.
Further Automation Impetus
Beyond the long-run industry influences, several current operational factors make the return on automation investment both more substantial and more urgent. Among the most important:
- Impact of the COVID-19 crisis. Three effects of the pandemic spotlighted the need for streamlined, consumer-centric processes.
- Severe drops and slow recoveries in revenue and profitability revealed that organizations need more cost savings and greater operational consistency.
- While the surge in telehealth has abated from peak levels during the pandemic, usage is expected to continue and grow for many types of encounters over the coming years. Telehealth management carries new/adjusted financial workflows that need to be electronic, integrated and convenient.
- The shift to a more remote workforce is best supported by automated transactions. Most revenue cycle departments are currently utilizing a hybrid or fully remote workforce. Many providers plan to maintain these models, making automated processes a long-run requirement.
- Increasing penalty for lack of automation. The CAQH report observed a larger gap between the cost for electronic transactions and the cost for partially electronic and manual transactions.3 As digital transactions attain increasing efficiency, delaying automation will only get more costly and difficult.
- Regulatory push. New industry mandates for information system interoperability and data-sharing promise to remove barriers to automated workflows erected by siloed data.
Automation Solutions
Fortunately, opportunities abound for health systems, hospitals and physician practices to achieve automation. Three high-volume processes offer a fast track to success.
RECEIVABLES MANAGEMENT
Remittance processing technology is available that supports paperless, exception-based workflows to automate insurance and patient receivables. The ideal system is cloud-based and focuses on electronic processes such as payment posting, unbundling aggregated remittances with posting to the proper system, and automated reconciliation. This technology reduces workload, decreases costs and improves accuracy, yielding ongoing automation benefits.
PATIENT PAYMENTS
A convenient, digitally enabled patient payment process will span the entire patient journey including pre-service, point-of-care and post-service. Successful organizations incorporate patient financing options which leverage credit line issuances based on pre-service estimates, electronic application and enrollment, and automatic credit approval. Patients also expect the process to offer electronic payments and simplified digital alternatives for receiving refunds. By streamlining the patient payment process, providers can give patients immediate peace of mind regarding the financial cost of medical services. The upshot is substantial patient satisfaction gains and solid cost savings.
PAYABLES
Centralized invoice automation can significantly enhance management of an organization’s high volume of supplier payments regardless of payment mode (credit card, EFT, check). Both scheduled and one-time payments can be automated, as can the reconciliation process. It is critical that invoice automation seamlessly integrates with different information systems and accommodates existing and future banking relationships, while minimizing operational disruption to the workforce. Additional benefits can be derived by making supplier payments with a virtual credit card that includes revenue-share.
It should be noted that emerging technologies promise further downstream enhancements in these and other critical areas, with the potential to unleash substantial benefits for healthcare providers.
Automation Critical Success Factors
There are four factors that should be considered when optimizing receivables or payables process automation.
A STRONG FINANCIAL PARTNER
A well-capitalized financial institution with healthcare experience brings several advantages to the automation effort:
- Size and stability that is valuable in a sector populated by many startups.
- An integrated array of solutions to meet evolving requirements.
- Full service to help consolidate multiple vendors for tighter coordination of efforts.
- Commitment to robust security standards.
EFFECTIVE SUPPORT STAFF
The implementation and support staff can make the difference between automation success and failure. They should help drive adoption and change throughout the organization. They should also address any questions or potential issues that may arise post-implementation.
ONGOING SURVEILLANCE
The gains from automation are most beneficial when sustained over the long-term. This requires consistent monitoring to ensure maximum usage and adherence to exception-based workflows. Recommended modifications can be proactively offered, based on learning from this surveillance.
STANDARDIZATION COMBINED WITH FLEXIBILITY
Automation should be standardized across the industry with the flexibility to handle an organization’s specific needs and priorities. That approach simplifies implementation and future upgrades, avoiding pitfalls that frequently plague fully custom solutions, and provides adaptability to satisfy individual needs and changes over time. Before adopting any type of automation, providers should first conduct or request a workflow analysis to ensure an automation solution will achieve the desired goals with minimal disruption to operations or staff.
Conclusion
The opportunity to unlock benefits through financial process automation is substantial, achievable and essential. The receivables and payables solutions highlighted in this article represent proven ways to take immediate action and begin realizing these benefits rapidly. These strategies, and the success factors that guide them, merit consideration by all healthcare providers.
Resources
- CAQH, 2020 CAQH Index, 2021.
- J. LaPointe, “Hospital Financial Automation Under 25% for Most Organizations,” RevCycle Intelligence, June 11, 2019.
- CAQH, 2020 CAQH Index, 2021.
