Administrative Simplification: A Look Back

Michael Rose

Author: Andrew Frost and Michael Rose

The year was 2002. Americans were starting to regroup after the September 11th attacks on the World Trade Center, Michael Jackson was named musician of the century and President Bush had signed the No Child Left Behind bill.

At the same time, healthcare institutions were starting to implement the three-legged stool also known as HIPAA (Health Insurance Portability and Accountability Act). This act, which passed in 1996, focused on:

  • Security
  • Privacy
  • Administrative simplification

The goal of administrative simplification was to improve efficiency and effectiveness. This was to be achieved by a new set of standards for transferring electronic data between healthcare providers, payers and covered entities. Transactions included claims, remittance, referral authorization, attachments and eligibility, as well as other healthcare identifiers.

So did the law simplify the healthcare world? Can healthcare providers submit claims more easily, get paid faster and lessen their costs? It depends on whom you ask, but for many organizations the answer could very well be yes.

It’s clear that more electronic transactions do lessen the administrative cost of healthcare. A study by Milliman Technology and Operations Solutions in 2006 showed a comparative cost of paper versus electronic transactions for a typical provider. The results show $42,000 per provider in savings, should all transactions become electronic. 2

A look at GE Healthcare clearinghouse historical data sampling over 200 customers across a 10 year period shows that providers are in fact sending more claims electronically today. Claim transactions are now upwards of 98% electronic.3

Further successes were gained in remittance. Back in 2002, the ratio of electronic claims to remits was approximately 70%.3 Today we are seeing averages greater than 85-90%.3 Furthermore, other technologies are evolving so that the remaining paper payments can now be automated using OCR lifting technologies.

Eligibility payer availability has also increased. Ten years ago, eligibility may have been available for 60-70% of payers.3 With the advent of high deductible health plans more than 95% of payers have availability. As a result, eligibility as a percentage of claims has risen to greater than 35%.3

What happens next? It looks like more simplification is coming, once again spurred on by the government. The 2008 passage of President Obama’s Health Care Reform put a spotlight on improved content and availability of the Eligibility and Claim Status transactions. Furthermore, the Electronic Remittance Advice (ERA) transaction has been updated to ensure compatibility with complementary Electronic Funds Transfer (EFT) transactions that are issued with ERA files.4

The market also continues to evolve as payers advance their eligibility and referral capabilities to ensure they are communicating with patients and providers on what the patient owes. This is crucial as the number of Americans on high deductible health plans has surpassed 13 million, and those patients are now responsible for a higher percentage of their care.5 Some payers have even offered real time adjudication to enable point of service claim submission. While common in drug and dental billing, these emerging capabilities in healthcare billing will enable even faster turnaround time and payment transparency.

Finally, claim status is evolving. Prompted by healthcare reform, more and more payers will have to offer this transaction, and with better content and transaction performance.  Clearinghouses and vendors are poised to take advantage of automated tools to integrate this transaction in parallel with existing eligibility connectivity.

Is complete automation possible? There will always be challenges in the transition from paper to electronic, but we are getting oh so close!

  1. HIPAA Administrative Simplification Requirements, May, 2003.
  2. Electronic Transaction Savings Opportunities for Physician Practices. Milliman Technology and Operations Solutions, 2006.
  3. GE Healthcare Centricity EDI clearinghouse data, 2002 – 2013.
  5. AHIP, Center for Policy and Research, May, 2012.


For more information about Centricity Practice Solution click here.

For more information about selecting an EMR solution click here.

For more information about GE Healthcare click here. 

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