Congress finally has approved long-sought government standards for electronic data interchange in healthcare, and experts say the potential savings in administrative costs could be enormous.
Buried in the Kassebaum-Kennedy health insurance law that President Clinton signed recently are several provisions that have escaped general notice and that portend great savings in administration costs-as much as $5 billion to $10 billion a year, by one estimate.
"This is one of those little sections that's been hidden away," said Kathleen Frawley, Washington director of the American Health Information Management Association. "It requires the secretary of Health and Human Services to adopt standards for unique health identifiers for every individual, every employer, every provider and every health plan." The standard-setting should allow much easier transfer of electronic claims data, which in turn will produce huge cost savings over time.
The inclusion of these measures in the Kassebaum-Kennedy bill is a result of intensive labors by a group of interested parties that came together on this issue about five years ago.
"This whole issue emanated in the Bush administration when then-(HHS) Secretary Louis Sullivan convened individuals in the public and private sector to talk about reducing administrative costs of healthcare," Frawley said. It's been introduced and attached to every healthcare bill since 1992. This is the first one to pass.
The Workgroup for Electronic Data Interchange was created to explore how these standards might be developed and what savings might ensue.
For a number of years hospitals and physicians have communicated electronically with insurance companies. Unfortunately, not everyone used the same data sets or put the same coded information in the same data fields.
Some state agencies, such as Medicaid and workers' compensation, and some private payers have rejected claims "because their computer systems don't recognize those codes," Frawley said. "We've got a lot of groups that don't adhere to official coding guidelines." In some cases providers alter the diagnosis on the claim form to make them conform. "People are going through all sorts of craziness to get a claim paid," she said.
The new law will standardize electronic data interchange, or EDI, transactions. Once the national numbering scheme is set up, said Gene Carruth, a vice president of Blue Cross and Blue Shield of Arizona who is chair of WEDI, "we will be able to route the transactions appropriately. It's like routing and transit numbers in the banking industry. If you write a check, (anyone) in the banking community knows where to send it. In the healthcare industry, this bill will force that standardization."
Hospitals already do much of their billing electronically; among physicians the number is much lower-around 35%, Frawley said.
Mark Segal, the American Medical Association's director of medical practice financing and systems, said administrative simplification should yield dividends for doctors, although it's hard at this stage to estimate how great they will be. Standardization will reduce costs for physicians using EDI to file claims, and widespread use of the technology should bring down the costs of software and computer systems. Also, reductions in the amount of manpower required to handle billing and paper work will occur in physicians' offices.
Physicians will be even more likely to use EDI if payers absorb the cost of claims filing, Segal said. The AMA thinks physicians should not have to pay a per-claim filing fee when they use EDI. Insurers are likely to go along with this, he said, because they save so much money themselves.
One of the things the AMA likes about the language in the Kassebaum-Kennedy law is it doesn't mandate that providers must bill electronically. Rather, it establishes standards that will make it in everyone's interest to do so.
The AMA will have a formal consultative role in developing the new standards for data interchange. The new law requires the secretary of HHS to adopt claims standards within 18 months and supporting documentation standards within 30 months. Then, once the standards are adopted, the industry has 24 months to implement them. Smaller health plans and rural providers are exempted.
In developing the standards, the secretary must consult with four groups:
The National Uniform Claim Committee, dealing with physician claims, under the leadership of the AMA.
The National Uniform Billing Committee, for hospital claims, under the leadership of the American Hospital Association.
The American Dental Association, for dental claims.
Carruth said providers in Arizona are slightly ahead of the curve. The Arizona Blues has connected every hospital to electronic billing, and 3,500 physicians also are linked. So far the Blues network operates on a proprietary billing technology. That will have to be altered as the national standards emerge.
In 1993, WEDI estimated the total one-time startup costs at $5.3 billion to $17.3 billion. But the net savings potential over six years reaches $42.3 billion.
WEDI broke down those net savings as $26.1 billion for providers, $9.4 billion for payers and $6.8 billion for employers. Then it noted that these savings will not be deducted in sum from the nation's total healthcare bill. Instead, EDI will save labor costs and paper-handling costs. The money saved will be reallocated to patient care and customer service.
"There is a proven benefit, not only to us, but to the others involved," Carruth said. "We've heard from physicians groups and hospitals in Arizona that they would not have been able to grow as fast without this electronic claims processing." With it they can increase volume, increase the number of claims processed and improve accounts-receivable days-all without adding staff.
"We need to get the decisionmakers in hospitals, in insurance companies, third-party administrators, etc., involved in this as a strategic decision for these people to spend some money," Carruth added. "They need to understand what it can do for their organization on the bottom line."