Health care administrative spending up despite decline in volume

A new report finds that the COVID-19 pandemic had a significant impact on administrative spending in 2020. Although administrative transactions were reduced as in-person visits were cut back during the first months of the pandemic, health care spending for administration actually increased, the study found, because of complexity and upheaval during the pandemic.

One bottom-line conclusion of the study was that although electronic transactions were trending up in 2020, the health care industry could save an additional $20 billion on certain administrative functions by transitioning to fully electronic transactions.

“After an extraordinarily challenging two years in health care, the industry’s progress toward automated and efficient administrative processes is encouraging,” said CAQH senior vice president April Todd. “Our experience during the pandemic has also highlighted future opportunities for savings through automation.”

Transaction volume was down, medical spend was up

Key findings of the study included data showing that transaction volume was down during 2020. “Both the medical and dental industries experienced drops in utilization as COVID-19 impacted health care policies, regulations, resources and social behaviors,” the study said. There was an overall 11% decrease in medical transaction volume, and a 3% decrease in dental administrative volume.

At the same time, the medical spend was up for that time period, with a 12% increase. Administrative spending for the dental care area was down 23%, however. “Manual transactions [for medical care] required more intensive intervention from providers to ensure that newly implemented requirements and codes were executed correctly, and that patient medical records were current and accurate,” the report said. “Conversely, dental spending decreased due to lower utilization often resulting in office closures.”

The rise of telemedicine

The study also noted the increase in telemedicine as the pandemic continued. “COVID-19 brought about a rise in telemedicine as providers and patients sought ways to safely access and obtain care while minimizing transmission of the virus,” the report said. “Telemedicine, while experiencing challenges, was viewed by providers and patients as a benefit during the peak of the pandemic that will likely continue into the future.” The report added that the path forward for telemedicine is unclear, but that pushing for interoperability and stakeholder collaboration should be priorities.

“While these processes and workflows may change as business needs emerge and new norms are established, it is important to maintain progress in automation and facilitate ease of transition,” the study said. “Through collaboration, stakeholders can identify best practices and solutions to streamline and transition business processes, enable a fully electronic administrative workflow and reduce administrative cost and burden.”

The report concluded by noting there continues to be opportunities for adopting electronic administrative practices that can cut costs. “The 2021 CAQH Index uncovered important shifts in health care administrative operations during the pandemic, some of which could have lasting implications,” Todd said. “Social distancing, remote work and an increase in the use of telemedicine have resulted in greater levels of automation today and additional opportunities for savings in the future.”