Tuesday, July 17, 2012

The Return on Investment of Administrative Simplification

Since 1997, the New England Healthcare Exchange Network (NEHEN), a non-profit run by stakeholder board members, has provided community-wide collaborative payer-provider administrative transaction exchange for a fixed subscription fee.

I was recently asked about the return on investment of administrative healthcare information exchange.

The answer is summarized in this presentation.

NEHEN members use the exchange for benefits, eligibility, referral authorization, claim status inquiry, and claims transactions.   There are no transaction fees.

Creative ways in which members use NEHEN include:

*45 days following service, self-pay accounts are passed through NEHEN to re-check for changes in insurance coverage, resulting in assignment of a payer to 15-20% of self-pay accounts
*Bad debt accounts are checked via NEHEN before write-off, resulting in assignment of a payer to 3-4% of bad debt accounts
*The accuracy of demographics and payer information is checked during inpatient hospitalizations so any corrections can be made while the patient is still receiving services.

The end result over the past decade is that denial rates have dropped from  5.5% to 3.25% of submitted claims.  Bad debt is running at 0.6% of net revenue compared to the pre-NEHEN rate of 1.2%.  Administrative write-offs due to delayed billing are at 0.02% of net revenue

Since payers and providers collaboratively run NEHEN without a middleman, the cost of supporting 100 million transactions per year is very low.    For a large academic medical center, the NEHEN annual subscription is approximately $250,000.     If the same transactions were processed by an outsourced revenue cycle vendor (.20 transaction fee) the cost would be about $952,000.   If the same transactions were sent via a clearinghouse (.12 transaction fee), the cost would be about $571,000.

Lower administrative costs for payers and providers, more timely reimbursement, and fewer write-offs have created a return on investment for NEHEN that  has resulted in sustained NEHEN membership for 50+ hospitals, 5000+ physicians, and 4.5M+ health plan members.

The is a clear ROI for administrative transaction exchange and NEHEN will continue to be a  convener of payers and providers for years to come.
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