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Hard Times in Healthcare: Business Intelligence Provides Support
Hypatia Research, LLC, March 2009, Pages: 10
Healthcare organizations in the U.S. are suffering through a financial pandemic with a combination of fluctuating markets, rising costs, and less generous payments from insurers putting severe strain on healthcare providers. Hospitals and physicians clinics are squeezed on all sides -- by insurance companies and Medicare, by patients wanting quality care but often unable to pay for it, by the high costs of medical equipment, drugs and supplies, and by the sheer bureaucracy needed to file claims, or deal with regulatory issues.
While the current economic crisis has negatively impacted healthcare providers, these problems have been in the making for several years. Declining admissions, rising costs and lower reimbursements from Medicare/Medicaid and insurers has put many providers into the red. Fully one-third of the nation's 5,000 hospitals are losing money, while another third are just breaking even.On the payer-side, insurance companies, too, are feeling the pinch of rising health costs and lower employer contributions. As advanced medical procedures and newly developed drugs continue to become available, insurance firms must decide which therapies to cover, and for how much. Some statistics to illustrate the situation: The American Hospital Association (AHA) reports that hospitals were on average, $831.5 million operating in the red in the third quarter of 2008. Moreover, the AHA also reports that 51% of the hospitals saw an increase in the proportion of patients unable to pay for care.
Efficiency: A Major Concern
For both health providers and payers, the rising costs of drugs, medical equipment, and health services have forced hard decisions about what constitutes good care and how much it is worth. New methods of determining what constitutes quality health care, such as evidence-based medicine and pay for performance, are increasingly pushing health care organizations to adopt BI systems that improve efficiencies and produce the numbers needed to justify their own decisions---both internally and to outsiders. Payers spend much time adjudicating claims and processing appeals. Providers spend time filling out insurance claims, checking patient numbers and diagnostic codes, and then appealing claims that get rejected due to incorrect forms.
All of that paperwork, whether digital or pen-and-pencil, adds up. The administrative overhead at hospitals is significant -- about 23 percent of total operating costs , Given that approximately a third of US hospitals are now operating in the red, with another third at just break-even, reducing administrative overhead and rooting out inefficiencies elsewhere is clearly critical.
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