According to a study published in JAMA, 20-25% of healthcare spending is wasteful, costing at least $760 billion per year. Administrative waste, the excess overhead that occurs primarily due to the complexities between providers and payers including time devoted to billing and reporting, is the largest area of waste and accounts for $266 billion a year.
Imagine how healthcare could be transformed if the industry save $266 billion a year. According to McKinsey & Company, these savings would be more than three times the combined budgets of the National Institutes for Health, the Health Resource and Services Administration, the Substance Abuse and Mental Health Services Administration and the CDC. Reducing administrative waste could also go a long way in supporting the 31 million people who do not have insurance.
We know waste is a profound issue in healthcare, with hundreds of billions of dollars being inefficiently and unnecessarily spent each year. How did we get here? As technology continued to advance, healthcare lagged behind. While industries like finance adopted more efficient and consumer friendly practices, healthcare has struggled to maintain legacy systems tat are crippling their ability to advance and meet the needs of their patients.
The U.S. healthcare system is complex with providers, payers, regulators and vendors all moving within the same ecosystem. Patient data is collected from several entities and typically not shared across the system. This approach to data creates a silo effect to treating and interacting with patients, making it difficult for providers to get a 360-degree view of patients and treat them most effectively. Most patients experience this whether it’s completing the same paper form across different parts of the patient journey, trying to resolve a financial issue between a payer and provider or waiting on prior authorization before having a procedure.
The transactional nature of healthcare also contributes to the administrative burden and waste. Underlying each patient touchpoint is a financial transaction that must be processed and approved. Managing this process requires a great deal of human capital and coordination.
These financial and data transactions are currently being managed through a number of outdated legacy systems that do not communicate with each other. This lack of automation requires staff hours and creates inefficient processes. With the current labor shortage in healthcare, automation could free up resources to assist with gaps in care.
Automation is the Answer
Cloud technology solves many of the issues with the current legacy systems, allowing for interoperability, innovation, value-based care and a better patient experience and health outcomes. According to McKinsey & Company, cloud capabilities have the potential to generate value of $100 billion to $170 billion in 2023 for healthcare companies – a giant leap in tackling administrative waste.
Cloud technology, like Salesforce Health Cloud, leverages, analyzes and connects data to overcome the silo effect of legacy systems. In addition, it creates a better patient experience through omnichannel engagement that meets the patient where they are in their healthcare journey.
Talent Unlocks Potential
Moving legacy systems to the cloud can seem daunting. An organization needs a clearly defined strategy that outlines goals and use cases that will win the support of the internal team to begin a digital transformation. Implementing a digital transformation requires talent that specializes in development, security and cloud specialist not typically found in a provider or payers IT departments. Due to the complexities, many organizations are bringing in external partners to lead and implement a cloud strategy.
According to McKinsey & Company, “Successful models have been those where partners are bringing the right strategic lens to evaluate different transformation approaches and ensure clients are not falling into common value traps such as over commitment to cloud spend, not building the foundational capabilities to run cloud, and sub-optimal focus on value levers.”
Cloud technology is the key to solving the administrative waste crisis in healthcare and providing a better patient experience. However, moving from legacy systems to the cloud can seem like a daunting task without the right partner to provide leadership, implementation and ongoing management and services.
This article was originally published on the Virsys12 blog and is republished here with permission.