How Technological Backwardness Wastes Health Care Money

The following is a guest blog post by Andy Oram, writer and editor at O’Reilly Media.

A rather disconcerting report on the state of health care payments has been released by InstaMed, a billing network that connects payers, health care providers, patients, and third-party billing services. (You can download the report after just filling out a few fields or watch some of the report details in this video.)

I think we all know that the adoption of computing technology to coordinate treatment and payments in health care lags behind most industries. This report reveals the progress it has made along with the substantial distance it has yet to go–and the effects of the lag on all of us. Patients and doctors are all suffering financially by a continued reliance on paper.

We should be charitable: the field is making progress. Half of insurers conform (p. 11) to meeting federally mandated standards covering the complex dance by which doctors request payments, insurers report back the status of the request (Electronic Remittance Advice), sometimes repeatedly over many months, and–when the doctor wins the jackpot and gets the procedure approved–insurers remit payment (Electronic Funds Transfer). Moreover, when the survey was conducted in 2013, 86 percent of health providers accepted payments by credit card or similar mechanisms (p. 9), although fewer than half of their payments actually come in that way (p. 5).

Huge amounts of time and effort are still being wasted, though. Even as patient responsibility for payment rises–because plans have been increasing copays and deductibles–there is still a tremendous lack of transparency. “In 2013, 72 percent of consumers said that they did not know their payment responsibility during a provider visit.” (p. 14) Perhaps, even worse, “42 percent of providers said that they did not know patient responsibility during the patient visit.” (p. 7)

What is the result? Providers get fewer payments at the time of visit, and have to send multiple bills to the patient by snail mail, and often even make phone calls (p. 17). About one third of the time, providers couldn’t collect payment when the service was provided because of “patient resistance,” (p. 9) probably a way to blame the victim because the patient was broke. But another third of the time, the provider admitted it didn’t know how much to charge the patient.

All this adds up to large costs for the provider. Moreover, patients can’t make intelligent choices. (We’ll leave aside for now the larger destructive consequences of fee for service.) It’s worth noting that the American College of Cardiology and American Heart Association recently recommended that doctors consider costs when recommending treatments for heart problems–certainly a harbinger of a trend. None of this can happen with the Byzantine payment systems in place.

I mentioned earlier half of payers follow standards to accept electronic payments. Well, that means that half don’t. The use of paper or fax adds an extra tax to negotiations that sometimes take months, as invoices go back and forth and payers reject invoices for a blank space or miscoding in a single field.

InstaMed recommendations include: “payers and providers must work together to help consumers take control of their healthcare payments–or risk further consumer dissatisfaction and lost revenue.” (p. 16) This is an audacious enough agenda, but I go much deeper in my call for change:

  • Publish open data on costs, hospital errors, and outcomes for common procedures. We already know that no correlation exists between cost and quality.

  • Collect detailed data about outcomes, deidentified in the best manner we know, in order to supplement clinical trials, which suffer from their own distortions. Find out where we’re wasting money just by assigning the wrong treatments.

  • Create better interfaces for submitting doctors’ bills, to eliminate the absurd ritual of multiple submissions that get rejected repeatedly by payers and create an entire third-party market just to get invoices right. Standardize billing procedures across payers. (I’m not taking on the issue of single-payer here.)

  • Eliminate fee-for-service and complete the payers’ current trend toward paying for outcome. This requires a lot more of the data mentioned in the second item, so we know what illnesses actually should cost to treat.