Research highlights ways to save more than $250 billion per year through healthcare administrative simplification

Savings can be generated at the organizational and industry levels through steps to reduce wasteful administrative processes, study authors wrote.

The healthcare industry can save $265 billion annually without compromising quality or access or incorporating structural or systemic changes such as single-payer, according to a new analysis.

As published Oct. 20 in JAMA, researchers with McKinsey & Company, Harvard University and the National Bureau of Economic Research recommend prioritizing five areas that account for 94% of administrative spending:

• Industry-agnostic corporate functions such as general administration, HR and nonclinical IT
• Financial transactions such as claims processing and prior authorization
• Insurance underwriting
• Administrative clinical support operations
• Customer and patient services

Steps that organizations can take

At the level of individual organizations, the authors’ proposed interventions are designed to address issues such as:

• Inefficient workflows (e.g., patient admission and discharge planning)
• Poor data management and lack of standardization (e.g., pertaining to submission processes for prior authorization forms)
• Disconnected tools and systems (e.g., lack of interoperability between health plans and hospitals)

By fixing such processes where possible, organizations can collectively save $210 billion per year. “The majority of those savings reside in industry-agnostic corporate functions such as finance or human resources,” the authors wrote.

Specifics of proposed interventions include:

• Automating repetitive work
• Using analytics to better predict and address temporary labor shortages
• Integrating a suite of tools and solutions to coordinate nurse staffing
• Building strategic communications platforms between health plans and hospitals

Areas requiring large-scale solutions

The authors acknowledge that systemic factors inhibit widespread implementation of interventions by organizations. They thus propose interventions at the industry and government levels as well.

Those interventions could save $105 billion per year, most notably “in the financial transactions ecosystem and industry-specific operational functions such as clinician credentialing and medical records management,” the authors wrote. After accounting for $50 billion in overlap between the sets of interventions, the authors arrived at the $265 billion annual savings projection.

Examples of macro-level interventions include:

• New technology platforms such as the use of a centralized, automated claims clearinghouse
• Operational alignment such as standardizing medical policies across payers
• Payment design such as globally capitated payment models for segments of the care delivery system