Is Claims Automation Worth It for Payers?
The payer segment of the healthcare insurance industry has long been defined by its complexity, particularly when it comes to claims processing. Payers often face challenges associated with processing pending claims - leading to higher administrative costs, cash flow disruptions, and compliance penalties.
A solution to this issue is using automation to streamline inefficient claim workflows and reduce administrative burdens… but is it worth the investment?
Manual Claims Processing: A Costly Bottleneck
The traditional, approach to handling claims is riddled with inefficiencies including slow processing times, human errors, and a high volume of pended claims. When it comes to processing claims, speed is everything. Yet, for many payers, manual claims handling leads to delays and inaccuracies, pushing the average claim settlement cycle to as much as 30% longer than it would be with automation.
Also, errors are a costly byproduct of human-driven adjudication. A mistyped procedure code or a misinterpreted policy can mean the difference between a claim being paid or denied. With different examiners applying rules inconsistently, the same claim might be approved one day and rejected the next, creating friction between payers and providers.
Then there’s the backlog. Thousands of claims sit in limbo, marked as pending, waiting for someone to manually verify a provider’s contract rate or check a member’s eligibility. The result? A slow, expensive process that strains payer operations and frustrates everyone involved.
These bottlenecks are a drag for payers looking to increase profitability, especially in competitive healthcare markets like Medicare Advantage. According to the American Medical Association (AMA), claims processing inefficiencies cost the healthcare industry between $21 billion and $210 billion each year.
Lowering Costs through Auto-Adjudication
Auto-adjudication (AA) refers to the automated processing of claims from submission to payment. Increasing this rate allow payers to minimize adjudication labor costs and frees up time for FTEs to work on other parts of the claims process. Moreover, automated claims are processed at ~$0.99, while manual processing can cost up to $4!
Another point worth noting is that most payer’s hover around an ~80% auto adjudication rate. However, many TPAs and regional health plans have auto-adjudication rates closer to 40-65%. This creates a large opportunity for smaller payers to increase profitability through implementing automation within their core claims processing system.
Quantifying the Savings
Implementing claims automation can deliver transformative financial benefits for payers, reshaping operational efficiency and cost management in the healthcare industry. Scaling automation has been shown to reduce operational costs by up to 30% within five years. This reduction not only eases the burden on administrative teams but also redirects resources to higher-value tasks such as member engagement and complex claims resolution.
Workflow automation offers even greater financial potential. Payers could save an additional $16.3 billion, building upon the substantial savings already achieved through earlier automation initiatives. These figures demonstrate how investing in automation can streamline operations and improve overall performance.
Is It Actually Worth It in the Long-Run?
For payers, the value of claims automation lies in its ability to fundamentally reshape operations. While the initial investment in technology and training requires careful consideration, automation directly addresses inefficiencies that drive up costs and slow down processes. By reducing manual intervention, claims automation improves accuracy and accelerates workflows, helping payers meet provider and member expectations more effectively.
Adopting automation also reflects a forward-thinking approach, enabling payers to stay ahead in a competitive market. With healthcare demands growing increasingly complex, payers that prioritize innovation position themselves to navigate industry challenges with greater agility.
Feel free to reach out to the Mizzeto team if you’d like to learn more about how to implement automation in your organization.
Sources:
AutomationEdge. "Claims Process Automation in Insurance Industry."
Healthcare Financial Management Association (HFMA). "Denials Management."
Managed Healthcare Executive. "Billing Process Continues to Improve."
One Percent Steps. "Real-Time Adjudication for Health Insurance Claims."
McKinsey & Company. "Automation at Scale: The Benefits for Payers."
Healthcare Finance News. "U.S. Healthcare System Could Save $163B Through Workflow Automation."