Trivia Question: What industry today produces more paper check transactions than it did in 2000?
I know this because it’s coming from me however, most, if not everyone will know that the answer to the question is healthcare. Yes, healthcare in the United States of America! The country that invented the personal computer, credit card, cellular phone, telephone, internet and automatic clearing house payment (ACH) is creating more paper than ever.. let me repeat, than ever!
Recently, BloombergBusiness published a story with the headline: Why America’s $2.9 Trillion Medical Industry Still Runs on Paper Payment
The article noted a few facts that those in healthcare services and those paying for healthcare know all too well. Today, we as consumers pay almost everything on line, we order things on line, we get customer service on line, and we file taxes online. In some cases, we know in real time what is going on with our credit card and bank accounts. Additionally, we can buy and sell stock on our mobile phones nearly in an instant. We as a society have mostly moved transactions to electronic payments. However, the healthcare payments and benefit segment of the $2.9 trillion (USD) healthcare industry (best case scenario) is “stubbornly stuck I the 1990s”. The article enclosed one graph that says it all…
The article went on to say that some insurers are paying as little as 39% electronically, some as high as 80%, that is it. Part of the issue is that small healthcare providers are not equipped, or for that matter wish to change their process to receive electronic payments. This forces providers and in many cases hospitals to have an army of people to process all the paper. I can confirm that from personal experiences over the last 20 years.
One claims clearinghouse mentioned in the article is quoted as spending “$87 million in the first quarter of 2015” or a quarter of its total revenues on postage – I guess we need to keep the United States Postal Service active! This collectively is costing (as published by federal government) all administering of private insurance to over $170 billion (USD) annually. We know based on other studies that nearly 30% (approximately $800 billion) of all healthcare expenditures is spent in total “administration” of the industry from eligibility, claims creation, transmission, adjudication, payment and receipt of such payments. Let’s put that into perspective…all of Obamacare’s cost the federal government about $100 billion a year net.
The slowest and most troublesome part of this problem rests at the people who provide the care, the small doctors’ offices. We need to invest more in digital records, and we must go further by investing as a society into fully digital medical offices. We have witnessed firsthand how hard it has been for providers to transition from paper records to electronic medical records – not because they don’t want to but because every change costs them time, money and productivity. Let’s be frank about something else, most physician’s compensation, adjusted for inflation, has been contracting. In that environment, we have lower quality and higher cost; all of which impact the entire industry.
In 2008, I had the honor to address a conference on innovation at Florida International University (in Miami, Florida) and talk about the healthcare industry . During that presentation, I used two slides that tell a full story:
Economic history shows us two things, every American industry that has the increased in quality and productivity, cost ALWAYS go down! I am optimistic that this tried and true method will soon begin to impact healthcare positively.
– Noel J. Guillama, President