Reducing Health Care Inefficiencies

Can Health IT save us from ourselves?  See the Yahoo Article on another assessment of health care spending in the U.S. and how much money is wasted in service delivery costs.  According to this article, about 1/2 of the spending of the U.S. on health care is wasted in inefficient use of resources.  Now, if you read the article, you will note that the top 8 items on their list only add up to about $600 billion, where the claim is that $1.2 trillion is lost (and you would think that a bunch of accountants could add, so maybe the journalists misread the fine print on the analysis), but even if you accept that much as the cost of inefficiency, that is more than it costs for the Medicare program in the U.S.

One of the big items on the list is inefficiencies with insurers who “magically deny” claims or otherwise require far too much in order for a provider to get paid appropriately.  I find it interesting that this remains on the list of problems.  In 1996, HIPAA was originally passed by Congress.  Part of HIPAA was to mandate that, through regulation, standards be developed for the electronic transfer of information between insurers and providers of health care, including claims.  The regulations eventually required that all or substantially all providers be able to submit claims electronically, which, one would expect, would be more efficient than the manual processing of paper claim forms.

So, if the auditors suggest that we still are wasting $200 billion per year on inefficient data exchanges with insurers, perhaps this deserves more focus.

Getting paid by insurers happens at the end of the process of service delivery to patients by providers.  At the beginning, patients present to the doctor’s office with a problem, see a Medical Assistant or Nurse for preliminary weights and measures (like blood pressure and weight, etc.), see the physician, CRNP or physician’s assistant, who may then refer the patient to another provider, write a prescription, make other suggestions to the patient, require that the patient get lab work to rule out certain causes, and so on.  At the conclusion of the visit, the physician will document, diagnose, and generate a financial transaction that must be processed and submitted to an insurer for payment.

The patient then will see other providers, the lab, the pharmacy, and perhaps come back for a follow-up visit with the physician.  All of the steps in the process involve data transfer between several information systems, often housed in several different facilities, with different standards and different purposes.  A key for a physician to get paid at all is to have accurate insurance information about the patient.  Surprisingly, patients are not necessarily the best source of this information.  However, insurers are apparently no better at knowing this on average.  Otherwise, it would follow that we would already have regional databases or a national database of eligibility data available for all providers.  I assert this because the standards for eligibility data have been around for a fair amount of time in the form of the ANSI X12 standard, but still there is a fair amount of lost dollars in the claims processing area of health care.

Perhaps this is so because providers want to get paid but insurers don’t have a good reason to pay them.  Insurers do benefit from holding onto capital to accrue interest on it.  The longer an insurer can do this, the more interest on the investment they collect, which goes straight to their bottom line.  ARRA’s incentive system requires that physicians meaningfully use health IT and participate in some form of a health information exchange.  But there is no comparable set of incentives for insurers to participate in HIE’s, or to incentive providers.

For example, this could be achieved by insurers preferring providers with health IT in place compared to those that don’t.  Another example would be for insurers to pay incentives to providers for a higher degree of clinical outcomes (only possible if the providers can produce useful and independently verifiable data such as lab information, which is really only possible through the use of an HIE).  The market may figure this out on its own, but I honestly doubt it.  Perhaps the feds will pick up on this market failure and intervene to start improving efficiencies in this area in either health reform now or in ARRA part II in the next several years.

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Maryland technology attorney and college professor.

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