Health Savings Accounts May Pressure Health Care Organizations to Reduce Administrative Costs, Improve Efficiencies, Finds PNC Survey

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As Americans with high deductible health plans and Health Savings Accounts pay more out of their own pockets for medical expenses, health care organizations and employers can expect greater demand for information about cost drivers and pressure to improve administrative efficiencies, according to Paula Fryland, manager of the national health care group for The PNC Financial Services Group (NYSE: PNC) in remarks delivered at the 2006 Consumer Directed Health Care Conference, May 8-9, 2006.

The health care organizations that can demonstrate reduced administrative costs and improved efficiencies will have a competitive advantage.

As Americans with high deductible health plans and Health Savings Accounts pay more out of their own pockets for medical expenses, health care organizations and employers can expect greater demand for information about cost drivers and pressure to improve administrative efficiencies, according to Paula Fryland, manager of the national health care group for The PNC Financial Services Group (NYSE: PNC) in remarks delivered at the 2006 Consumer Directed Health Care Conference, May 8-9, 2006.

“Consumers are beginning to play a more active role in managing their health and demanding accountability about the costs from their insurance companies, employers and health care providers,” said Fryland. “The health care organizations that can demonstrate reduced administrative costs and improved efficiencies will have a competitive advantage.”

Fryland presented results of PNC’s e-Health Study, a nationwide survey of hospital and health plan administrators, that found health care executives expect Health Savings Accounts to further complicate the process of submitting and paying medical claims. Respondents emphasized the need for adoption of information technology solutions to improve efficiencies and greater collaboration among health plans, providers, employers and the financial services industry to rise to the challenge of consumer-centric health care.

Highlights of the findings include:

  •      Four in 10 hospital administrators surveyed expect that Health Savings Accounts will increase the administrative burden associated with medical billing and claims processing.
  •      One-third of survey respondents agreed that transitioning from a paper-based medical claims process and remittance process to an electronic, automated system using electronic data interchange and electronic funds transfer, will become a business imperative to counter the additional administrative complexities of consumer-directed health care and HSAs.
  •      Nine out of 10 hospital executives and eight out of 10 insurance company executives agreed that health plans should have to disclose information about the payment processes in the context of how these costs ultimately affect health care premiums.

  •      85 percent of hospital executives and 74 percent of health plan executives agreed that the nation’s health care costs would decrease if health plans were required to report on the efficiency of their remittance processing.
  •      Half of hospital executives and four out of 10 insurance executives said their organizations could save at least $1 million and as much as $10 million a year if their billing and payment processes were more efficient.

“American consumers are looking for accountability from organizations or businesses in whose trust they put their money along with better information about where and how their dollars are being spent. For example, not-for-profit organizations today disclose information about administrative expenses and their philanthropic mission, and patrons make decision to donate based upon that information,” said Fryland. “Likewise, in an era of consumer-directed health care, patients want to know the value of what they are buying and how much of each health care dollar is spent on administrative expenses versus clinical care.”

Benefits of Electronic Claims and Remittance Processing

According to both hospital and insurance executives surveyed, an automated electronic remittance and payment processing system could significantly improve the efficiency of the claims process, but these electronic formats have not been fully adopted by the health care industry. A lack of standards in formats used by commercial insurers, infrastructure costs and inability to quantify return on investment were identified as barriers to more widespread adoption of electronic data interchange and electronic funds transfer. Yet PNC’s e-Health Study found tangible benefits among organizations that have been first to move towards electronic, automated claims processing.

  •      Forty percent of hospitals and health plans surveyed report significant administrative cost savings since adopting electronic data interchange and electronic funds transfer.

  •      Nine out of 10 health plans cite a decrease in errors on balances owed and fewer billing “hassles” related to coding and lost claims.

The PNC e-Health Study was conducted by the independent research firm, Chadwick Martin Bailey, based in Boston, Massachusetts. A PNC e-Health Study media kit containing background information, survey highlights, topline findings, graphics and audio expert commentary is available through PNC’s website at http://www.pnc.com/pncnews/healthcare.html.

The PNC Financial Services Group, Inc. is one of the nation's largest diversified financial services organizations providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

CONTACTS:

The PNC Financial Services Group, Inc.

Amy Vargo

(412) 762-1535

amy.vargo @ pnc.com

The Hubbell Group, Inc.                    

Constance Hubbell Clapp                

(781) 878-8882                        

hubbell @ hubbellgroup.com

This report has been prepared for general informational purposes only and is not intended as specific advice or recommendations. Information has been gathered from third-party sources and has not been independently verified or accepted by The PNC Financial Services Group, Inc. The PNC Financial Services Group, Inc. makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. The PNC Financial Services Group, Inc. cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third-party sources. Any reliance upon the information provided in the report is solely and exclusively at your own risk.

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