Why Healthcare Payers are Leaking Revenue Over Data Quality

Madaket Health’s Eric Demers offers insights on why healthcare players are leaking revenue over data quality. This article originally appeared on Solutions Review’s Insight Jam, an enterprise IT community enabling the human conversation on AI.

We’ve all heard “data is the new oil,” and just like oil, data’s value is created during its refinement—a process that depends heavily on creating quality. The phrase “garbage in, garbage out” has never been truer in healthcare’s data world. Quality data results in increased efficiency and savings, but poor and inaccurate data only leads to millions in revenue lost down the drain.

Estimates suggest that poor data quality costs U.S. companies $3.1 trillion annually. In the healthcare payer industry, critical for keeping the U.S. healthcare system paid and, therefore, operating, quality provider data is paramount. Every health insurance plan keeps a directory of provider data, including listings of healthcare professionals and facilities that are part of a health insurance plan’s network. It’s a mission-critical resource that, in theory, ensures patients can find and select healthcare providers within their insurance network so they receive care that is covered by their health plan.

And yet, just last year, an industry study revealed that four out of five provider directory entries in the five largest private health plans were inaccurate. The cost of incorrect data in these directories is substantial, costing payers millions in lost revenue and regulatory penalties. That cost is certainly passed along to the American public and further compounds skyrocketing healthcare expenses. As AI progresses into more facets of business, surely increasing data quality and improving provider data management (PDM) should be easy.

The Financial Impact of Poor Provider Data Quality

More than 50 percent of all patients use a health plan’s provider directory to select a physician. Everything from a missing phone number to an incorrect network status hinders care access, escalating healthcare costs further. It’s clear that the current state of provider data management in healthcare is unacceptable. But how does poor PDM affect other areas of healthcare?

Increased Operational Costs

While sound data management processes help to ensure swift credentialing, payer enrollment, network participation, and payment to providers, payers today spend considerable resources manually rectifying errors. When this time-consuming and error-prone process fails, costs escalate. Physician practices revealed their annual directory maintenance costs are $2.76 billion.

Higher Costs Passed to the Public

Ultimately, these inefficiencies contribute to higher healthcare costs for consumers. The costliness of poor PDM also affects patients, as they rely on provider directories to seek care that is covered by their health plan and avoid unexpected medical expenses. A 2020 Journal of General Internal Medicine study found that 30 percent of patients received surprise bills as a result of errors in their health plan’s provider directory.

• Lost Revenue: Moreover, patients have every right to dispute these bills if they’re caused by poor data quality and even switch health plans. This churn results in lost revenue and impacts the payer’s marketability.
• Understanding the Provider Data Journey: Provider data undergoes a complex lifecycle from collection to exchange, and each stage presents unique challenges.
• Data Collection from Providers: Initial data collection is often mismanaged as it is often done manually, increasing the likelihood of human error.
• Data Integration and Verification: Integrating data from various sources and verifying its accuracy is challenging due to discrepancies and lack of standardization.
• Data Exchange: Technological and procedural differences complicate seamless data exchange between payers and providers.

Overall, the mismanagement of provider data contributes heavily to claims processing errors, especially denials, adding nearly $17 billion annually in unnecessary healthcare costs.

Challenges in Provider Information Exchange

Nearly a third of physicians switch practices, hospitals, or affiliations every year, meaning provider data is always changing and records require constant updates. It’s a logistical nightmare for payers, especially since the exchange of provider information is fraught with obstacles that impede data quality.

It’s common for payers and providers to use different systems that aren’t compatible. There are no standardization requirements, which means data integration and exchange are cumbersome, time-consuming, and error-prone. Regulations haven’t made it any easier, either. Federal legislators are determined to protect patients from surprise billing by pressuring payers to keep their provider directories current. But if they don’t have reliable provider data to begin with, maintaining compliance can be nearly impossible.

Solutions to Improve Provider Data Quality

Addressing these data quality issues requires a multifaceted approach that begins by implementing robust data governance frameworks. Until clear policies and procedures are established to ensure the availability, integrity, security, and usability of data available to an organization, PDM will continue to be a messy, expensive process.

The second step is to facilitate better collaboration between health plans and providers so that they share the responsibility of provider data management. Solutions already exist that can standardize provider data and enable credentialing with multiple health plans from a single platform. CAQH reported that providers using these PDM platforms save an average of $1,250 in administrative costs per month and could save the U.S. more than $1.1 billion annually.

It should come as no surprise that in 2024, digitizing and standardizing PDM will be the key to reducing wasteful administrative spending.

Taking Out the Garbage

Data quality is of the utmost importance to the healthcare industry today. Poor provider data management impacts everyone, from payers to providers and patients. Implementing standardized processes and leveraging digitized PDM solutions can dramatically improve the industry’s ability to refine and manage data. Health plans and providers share the burden of reducing administrative costs and improving the quality of care by ensuring that accurate provider information is always available so all parties enjoy a more efficient and cost-effective healthcare system.