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Electronic Transactions – Where’s the Benefit?
In November, 1991, Secretary of Health and Human Services, Dr. Louis Sullivan , convened a forum of national health care leaders to discuss the challenges of reducing administrative costs in the U.S. health care system. Many of the recommendations were included in the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Final regulations requiring standard electronic transactions and code sets for implementation in 2002 were published on August 17, 2000, for implementation by October 16, 2002.
The regulations affect all health plans (including ERISA), health care clearinghouses, and any health care provider who transmits health information in an electronic transaction. Health care organizations must uniformly use standard electronic transactions by the year 2002. Those plans and providers that choose not to use the electronic standards can use a clearinghouse to comply with the requirement. Providers' paper transactions will not be subject to this requirement.
More than eighty percent of dentists have computers in their office and most practice management systems permit dentists to use electronic transactions, but only 25% of dental claims are transmitted electronically. Clearinghouses charge approximately $.50 for processing an electronic claim which is comparable to postage and mailing costs. So where's the benefit?
Dr. Scott Trapp, a general dentist from Omaha, was recently invited to participate on a panel at the annual meeting of the Workgroup for Electronic Data Interchange (WEDI). "I realized the real benefits are not in the claim transmission." he said. "When a pharmacist submits an electronic transaction, he gets a response confirming eligibility, the patient's financial responsibility, and notice of the electronic transfer of funds to his account in five seconds."
Working with the ADA's Department of Dental Informatics, Dr. Trapp has developed a spreadsheet that allows a cost comparison of paper and electronic transactions. It allows the dentist to customize the information with individual practice statistics and time estimates and calculates the weekly costs for eligibility verification, claims preparation, account posting, status checking, and the cost of accounts receivable.
"The significant benefits are in the time saved," he noted. "Ten minutes on the phone to check eligibility compared to six seconds electronically adds up. An electronic remittance advice can be posted in a fifth the time required for manual posting. I estimate that replacing paper and phone transactions could save $200 per week."
| E-Commerce Benefits |
| Benefit Type |
Paper/Phone
Transactions |
Electronic
Transactions |
| Practice Statistics |
|
|
| Visits Per Week |
80
|
80 |
| Percent with Insurance |
60%
|
60% |
| Eligibility Verification |
10% |
10% |
| Staff Cost per Hour |
$15.00 |
$15.00 |
| Average Claim |
$95.00
|
$95.00 |
| Average Co-payment |
$20.00 |
$20.00 |
| Uncollected Co-payments |
40% |
20% |
| 30 Day Payments
|
30% |
80% |
| 60 Day Payments
|
30%
|
10% |
| 90 Day Payments
|
30%
|
10% |
| Cost of Capital
|
10%
|
10% |
| Time Estimates (in minutes) |
|
|
| Eligibility Determination
|
10
|
0.1
|
| Claim Preparation |
5
|
0.5
|
| Account Posting |
3
|
0.5 |
| Status Checking
|
10
|
0.1 |
| Weekly Cost Estimates |
|
|
| Eligibility Verification |
$12.00
|
$0.12
|
|
Claims Preparation |
$60.00
|
$6.00
|
|
Account Posting |
$36.00
|
$6.00
|
|
Status Checking |
$84.00
|
$0.24
|
| Mailing or Clearinghouse |
$25.44
|
$24.00
|
| Investment in AR |
$41.76
|
$10.92 |
| Weekly Total |
$259.20
|
$47.28 |
"My practice management system can handle these transactions, but not all my payers can," Dr. Trapp noted. "Some of them have a long way to go to become HIPAA compliant."
A copy of the Excel spreadsheet Dr. Trapp used to compare costs of paper and electronic transactions is available by e-mail from the ADA's Department of Dental Informatics. Send an e-mail request to informatics@ada.org or call 312-440-4608. You may also download the Excel spreadsheet.
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