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Getting Rid of Friction in Healthcare

Fletcher Lance, for HealthLeaders Media, September 11, 2009

Friction occurs when an object moving through space, encounters resistance, slows down, and has its forward energy diverted. In the world of healthcare, friction is a term that has become synonymous with paperwork.

Today, the U.S. spends $2.3 trillion on healthcare, and the U.S. Health Care Efficiency Index estimates that we could reduce this cost by $30 billion if we could eliminate the friction of phone-based and paper-based systems.

This is a significant savings, and the American Recovery and Reinvestment Act is an attempt to realize that savings with a very targeted focus on electronic medical records. If all of the physicians in the country used EMRs, the argument goes, we would dramatically improve the efficiency of our healthcare system. The only problem is that only 17% of physicians are using EMRs today, so we're talking about converting 83% of physicians to a computerized system for maintaining patient records, and while we absolutely must move in that direction, it is going to be a long and time-consuming process.

Low-hanging fruit
Meanwhile, a much quicker fix is not getting much attention in the current debate, and that is the savings that could be realized by full conversion to electronic healthcare claims.

Unlike EMRs, electronic claims aren't slowed down by privacy issues and other barriers that arise with business-to-human transactions. They offer billions of dollars of savings. According to the Center for Health Transformation, 90% of claim payments are still made in the form of a paper check. By eliminating these paper-based checks, the U.S. could reduce the overall cost of healthcare by $11 billion.

Every paper check that is eliminated and replaced with a wire transfer saves the payer 78 cents, according to a study by Yoo and Harner.And given the fact that a few large payers—United Healthcare, Aetna, Cigna, and BlueCross BlueShield—are responsible for a majority of claims checks written in this country, making the switch to electronic healthcare claims may be easier than you think.

How we make the switch
Making this change requires a standardized process that all participants would agree to follow, that would include several basic elements:

  • It would start with shared and enforced electronic standards for eligibility, authorization and claims processing for all payers and providers.
  • These eligibility standards would need to be clearly communicated to providers.
  • The next step would be establishing agreements between payers and providers on "approved" processes for complex, high-costs cases.
  • And finally, there would need to be a system of third-party monitoring for adherence to the standards.

Frictionless healthcare is about removing cost from the system. If we start by eliminating paper-based claims, we could achieve a significant savings success story that could actually make it easier to achieve ultimate success in the goal of healthcare reform. And saving $11 billion in the process wouldn't be a bad way to get started.


Fletcher Lance directs the national healthcare practice of North Highland, a business consulting firm. He may be reached at Fletcher.Lance@northhighland.com.
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