Confirming a patient's insurance status through an electronic connection can shave $1 off the expense of each inquiry compared with manual insurance checks, a new study shows.
Also, a similar electronic link to pre-authorization and precertification information can chalk up savings of $2.70 to $4.50 per transaction for primary-care practices and physician specialists, according to the results of the study conducted by researchers at the University of Wisconsin-Milwaukee.
The researchers examined the costs incurred by providers in working with insurers and other payers. Then it compared typical phone and fax exchanges with the electronic capabilities potentially available from the Wisconsin Health Information Network. The Milwaukee-based community health information network, or CHIN, connects seven insurers to 16 hospitals and more than 1,300 physicians.
The study was part of a final phase of work-flow research commissioned by WHIN to document incremental savings in using electronic information exchange in healthcare. The first part of the study examined exchanges between physician offices and hospitals (Sept. 18, 1995, p. 50). The most recent phase covered the costs of doing business with payers.
One of the original hunches in studying the payer connection was that more accurate checking of eligibility in advance of treatment would net savings measured in fewer rejected claims.
But the study of administrative operations didn't uncover much evidence that current manual practices of eligibility verification are leading to significant account collection problems, said Kathy S. Lassila, lead researcher for the study. Verification practices, however, are adding to the costs of healthcare because of the sheer number of times that eligibility is being checked, double-checked and even triple-checked to make sure treatment is covered, she said.
"Two phone calls are typically required for each preauthorization/precertification-one for eligibility/benefit-level verification and a second for the*.*.*.*approval," the study said.
Specialty practices and hospital departments are both "meticulous" in getting the proper approvals, but that often results in a barrage of calls to the insurance company over the same issue, Lassila said.
Even when a specialty practice passes along the approval information, "the hospital admitting department will initiate a separate contact to payers to verify the eligibility and required approvals," the study reported. "Neither party appears willing to take the word of the other."
In addition, a patient also may call to check up on insurance coverage. "For a single event, a payer is fielding six calls on it," Lassila said.
Doing all that checking on an automated system can save money per transaction, according to results formulated in the study.
But if healthcare organizations could devise a way to authenticate approvals to one another's satisfaction and come up with a secure electronic holding area for approval status, providers could save more by cutting down on the number of transactions, Lassila said.
Primary-care physician offices bear responsibility for the initial eligibility check, but the offices studied by university researchers usually limited the check to photocopying an insurance card or looking up a name on the most recent "hard-copy" eligibility list provided by the payer.
The savings of $1 per eligibility inquiry computed in the study is based on an assumption that determining current eligibility status will be a key duty of primary-care physicians acting as "gatekeepers" in the health plans they participate in, Lassila said.
That relatively small saving per transaction would add up to the biggest overall benefit of electronic connection because it would be a part of every patient visit, she said.
Pre-certification of tests and procedures would save $4.50 per electronic transaction, but the study recorded little volume for that type of inquiry at the primary-care level. Savings on authorization for specialty consultation amounted to $3.50 per transaction, but the transaction level was much higher, resulting in the next-highest savings for primary-care practices.
The study was supposed to examine the benefits for payers doing business electronically with providers, but researchers couldn't get adequate participation from insurance organizations by the time funding from WHIN ran out, Lassila said.
Changes in leadership at both WHIN and the university's school of business administration have put the remainder of the study in limbo. WHIN's general manager since its 1992 inception, Frank Hoban, took a position as director of business development at Ameritech Health Connections, a unit of Chicago-based Ameritech Corp., which owns a 50% interest in WHIN. In March, Michael C. Jordan was appointed president and general manager of WHIN.
Estimated* potential savings for CHIN-facilitated transactions
Per transaction Per month
7-physician family practice-4,000 patients/month
Eligibility determination for patient visit $1.00 $4,000
Pre-certification for tests/procedures 4.50 90
Authorization for specialty consultation 3.50 2,625
Billing follow-up, claims investigation 2.00 150
Estimated monthly savings $6,865
Specialty practice-4 vascular surgeons, 2,700 patients/month
Referred patient eligibility and authorization 0.30 810
Pre-authorization and pre-certification of tests, procedures 2.70 2,100 Billing follow-up, claims investigation 2.00 270
Estimated monthly savings $3,180
82-bed hospital-admitting, utilization review, billing
Insurance verification for inpatient/outpatient admission 2.20 3,168 Utilization management 3.00 1,476
Billing follow-up, claims investigation 2.00 390
Insurance inquiries from physician offices 2.00 120
Estimated monthly savings $5,154
*Actual net impact of CHIN use could not be determined because of limited availability and use of payer-oriented services. The study used data on costs and volume of information-exchange transactions to calculate savings.
Source: University of Wisconsin at Milwaukee