How Improved Software Choices Can Reduce US Healthcare Expenses

Denied insurance claims represent one of the major challenges faced by the U.S. healthcare system, resulting in increased costs and billions of dollars in unpaid bills for providers. A recent study highlights how better management of healthcare software systems could significantly lower claim denials and associated costs.

Hilal Atasoy, an associate professor at Rutgers Business School, emphasizes that a straightforward yet effective solution lies in optimizing software management. Her research, published in the September issue of MIS Quarterly, explores how electronic health records (EHR) systems influence claim approvals and denials.

Claims typically include patient demographics, medications, medical histories, and procedures. Errors or discrepancies such as incorrect data or uncovered services can lead to claim rejections. To improve the accuracy of health data collection, the 2009 HITECH Act incentivized the adoption of EHR systems, aiming to lay a technological foundation for healthcare reform. However, the initiative faced challenges with interoperability—when different systems from various vendors do not communicate effectively, leading to data fragmentation and increased claim denial rates.

Between 2000 and 2020, approximately $745 billion worth of healthcare services went uncompensated, heavily influenced by claim rejections. To understand this phenomenon, Atasoy and colleagues analyzed the health records of over 19 million patients across 48 hospitals in Maryland, focusing on whether initial claims were approved or denied.

Their findings reveal that the choice of software plays a crucial role. Hospitals that relied on multiple vendors experienced higher denial rates—about 1.18%—compared to those that used a single vendor, which saw reduced denial rates of approximately 1.03%, translating into substantial savings over millions of claims. Additionally, physicians practicing across hospitals with similar EHR systems showed fewer claim rejections, as familiarity with the system reduced errors and improved data accuracy.

This research suggests that standardizing software and improving system interoperability can enhance data quality and adherence to payer requirements, ultimately reducing claim denials. Such improvements could help lower overall healthcare costs, which are inflated by inefficiencies and unnecessary billing disputes.

Atasoy points out that reducing denials can help alleviate the financial burden on clinics, hospitals, patients, and taxpayers. She advocates for the federal government to strengthen EHR certification processes and minimize variability among vendors. Emphasizing user-friendly and consistent interface designs can further decrease errors and improve information flow across different systems.

In conclusion, while technology alone cannot solve all healthcare cost issues, optimized software choices and system standardization have significant potential to decrease wasteful spending and make healthcare more affordable.