Introduction to Healthcare Transactions
[00:00:00] Stacey Richter: Episode 497. "What You Don't Know About Healthcare Transactions and Clearinghouses Could Cost You. Here Is a Few Actionable insights". Today I am speaking with Zack Kanter.
The Inches of Healthcare Waste
[00:00:31] Stacey Richter: Okay. This show today is part of our Relentless Health Value, "The Inches Are All Around Us" series. This Inches Talk is a metaphor for finding all those little places where there is healthcare waste as a first step in an effort to excise all these little pockets of waste.
Shane Cerone said this phrase during episode 492 and I loved it because there are inches all around us for sure.
And the thing with all these inches that we're gonna talk about today and last week and next week and the week after that, yeah, these are inches that actually you could cut them. And there are millions and billions of dollars, and you actually improve patient care. You improve clinical team experience.
Also, you're cutting out friction and making it easier to do the right thing to care for patients. These are no-brainer kinds of stuff. If your North Star is better and more affordable patient care, but they are also somebody else's bread and butter in a one person's cost is another person's revenue kind of way.
So yeah, what makes perfect common sense might not be as easy as it might look on paper, as we all know so well.
Challenges in Healthcare Transactions
[00:01:39] Stacey Richter: So last week we dug into all of the inches of expensive friction that develop when stakeholders interact. Like, a clinical organization and a payer, and a plan sponsor, self-insured employer, they try to get paid or pay, they try to direct contract because what will be found fast enough is that the data is not, the data is not the data, as Mark Newman talked about last week [EP496], and a dollar is not, a dollar is not a dollar.
Again, you'll find this out fast enough. All of you know when you talk to entities, up and down the patient journey or across the life of a claim, otherwise known as a healthcare transaction. It's mayhem to get a claim paid often enough. Each stakeholder comes in with their own priorities and views and accounting methods and various roll-ups.
I like how Stephanie Hartline put it. She wrote, "Healthcare moves through many hands without a rail that preserves truth along the way. Attribution breaks and truth gets reassembled later. The difference isn't capability, it's infrastructure. Line item billing does not equal line item settlement."
Or I also like how Chris Erwin put it. He wrote, "When the blueprint isn't standardized, you aren't scaling. You're just compounding chaos.”
And yeah. Then all of a sudden when there's no through line, there's no rail that connects all the data to the data, to the data, or all the dollars to the dollars to the dollars, suddenly 30% of any given healthcare transaction goes to trying to straighten it all back out again to reassemble it as Stephanie said.
It's like unleashing a hundred chaos monkeys and then having to pay to recapture them all. Listen to the show with David Scheinker from last year about, “Hey, how about we all just use the same template and avoid a lot of this.” Or read Zeke Emanuel's book about how the USA should potentially consider copying the Netherlands model because they have private insurance. But they cut admin costs 75% or something like that. Oh, right. Through standardization.
Jesse Hendon summarized this the other day. He wrote, "Providers don't need armies of coders to fight 50 different insurance rule books when you have some standardization here.”
I say all this to say after recording the episode with Mark Newman from last week. I have become intently fascinated by what goes on in this nonstandardized or otherwise friction points between stakeholders. There are a lot of inches in this gray area, land of confusion.
The Role of Clearinghouses
[00:04:00] Stacey Richter: This show today digs into one of them, which is what does it take to process a claim? Just technically. What are the pipes involved to submit a claim and again, get paid for it, which is a healthcare transaction. Just simply the technology moving the data around, even if everything in the pipes is a nonstandardized hot mess.
Because just fixing up the processing and the pipes here. Again, while this doesn't solve, the entire data isn't a data isn't a data or a dollar isn't a dollar isn't a dollar problem.
If we can just cut out some of the processing and the moving the data around costs, just this all by itself is $6 billion a year worth of inches. Plus as an added bonus, fix up the pipes for better data flow and now patient care can be faster. If, for example, the prior author, etc, processes transpire faster. And clearinghouses have entered the chat.
But you know, when clearinghouses come up, at least in my world, when the clearinghouse word gets dropped, it's usually accompanied by like a puff of smoke because no one is quite sure what those guys do all day. So we all sort of look at each other in the conversation and move on.
Lucky for me and possibly you if I've managed to suck you into my web of intrigue, I ran into Zack Kanter from Stedi, a new clearinghouse who agreed to come on the pod here and aid my exploration into this demarcation zone between stakeholders.
So let's start here.
Interview With Zack Kanter
[00:05:26] Stacey Richter: What is a clearinghouse? Well, a clearinghouse is the same thing as a switch when we're talking about pharmacy data transfers, if you're familiar with that terminology, and that's helpful. But either way, in the conversation with Zack, Kanter that follows, Zack will explain this better, but clearinghouses are like a hub maybe that connects all the payers with all the providers.
So if you want an eligibility check or you wanna submit a claim or do a prior auth of the payer, whatever you're trying to do, get paid. You as an EHR system or a doctor's office, or an RCM (revenue cycle management company) you don't have to set up your own personal data connection with every single payer out there.
You don't have to go through all the authentications and the BAAs and map all the fields and set up the a hundred SOC-2 compliant APIs. Instead, you can hook up to one clearinghouse and then that clearinghouse connects with everybody else.
So most medical claims transactions have a clearinghouse in the middle, like an old timey telephone operator routing your claim or denial or approval of that claim or eligibility check or whatever to the right place. And unfortunately, old timey telephone operator is a pretty apt metaphor depending on which clearinghouse you're using.
Anyway, Zack Kanter told me that the price to just send and receive an electronic little piece of data in healthcare through a clearinghouse costs about 1000 times more than any other industry would pay. Like if you do an eligibility check, that's gonna cost 10 to 15 cents per.
The trucking industry pays that much for a thousand such data transfers. They would riot if someone asked them to spend a dollar for 10 data transfers, that'd be ridiculous in their eyes.
But in healthcare, all these dimes add up to, again, $6 billion a year, them some inches there, which also equal delays in payment and patient care. Now you might be thinking, oh, well, maybe it costs this much because healthcare is so much more complicated than trucking or whatever.
Well, turns out the opposite is true because of HIPAA, ironically enough, healthcare is in fact much more standardized. We were talking about standardization before, but healthcare is actually much more standardized than many other industries due to HIPAA's administrative simplification rules, which mandate a universal language for transactions. The pipes I'm talking about now.
So actually, for as much as I was just kvetching about chaos monkeys compared to other industries, the baseline construct here is actually much more orderly than, for example, the trucking industry or whatever, like Amazon or Walmart has to deal with with their millions of vendors.
Now, and here's a really big point, especially for self-insured employers. You know who the main customer is for a lot of the more programmatic, the newer kinds of clearinghouses, I'll tell you, newer digital entities who do RCM (revenue cycle management) for provider organizations and that can be great if you're a practice just trying to keep up with payer denials and expedite patient care.
But look, all you plan sponsors and self-insured employers and maybe unions out there, the more RCM purveyors start working with programmatic clearinghouses, the more you not doing programmatic prepayment integrity programs with unconflicted third-party prepayment integrity vendors who are as hooked into the data streams and the clearinghouses as the RCM vendors are, the more, as I said last week, increasingly you're bringing a ever more rusty knife to a gunfight.
So that is certainly something to consider. There's a whole episode next week about this with Mark Noel from ClaimInsight. Or if you just can't wait, go back and listen to the show with Kimberly Carleson just for the gist of it, or the one with Dawn Cornelis from a few years ago. They're talking post payment integrity programs, but a lot of the same rules apply.
My name is Stacey Richter. The show today is sponsored by Aventria Health Group as usual. But I do want to say that we got some very appreciated financial support from Stedi, the only Programmable Healthcare clearinghouse.
And here is my conversation about all of the inches that are all around us, specifically in the healthcare data pipes with Zack Kanter, who is the CEO and founder over at Stedi.
Zack Kanter, welcome to Relentless Health Value.
[00:09:42] Zack Kanter: Thank you for having me. Excited to be here.
Cost and Efficiency Issues
[00:09:44] Stacey Richter: So let's, let's begin at the end here. As we're thinking about healthcare waste. What I'm very intrigued to talk about today is what are things that we might be paying for that we have no idea that we're paying for.
Especially things that ultimately wind up costing billions and billions of dollars that we might not be so aware of. Relatively speaking, are healthcare transaction costs high?
[00:10:08] Zack Kanter: When we look at the size of the dollars that are being expended on just the processing of the transactions, like claims and eligibility checks and claim status, you're talking in the neighborhood of, call it five to $7 billion. And how that compares from a transaction cost standpoint to other industries, it's hundreds or thousands of times more than you're seeing in in other industries, which means that for argument's sake, that 5 to $7 billion should go down by 90%.
[00:10:36] Stacey Richter: 5 to $7 billion.
It's obviously egregious compared to other industries. If I'm thinking about just maybe the cost per transaction, however we wanna do this. What's the difference in cost?
[00:10:50] Zack Kanter: When you compare the cost of sending a claim, which is in the 10 to 15 cent range, round trip, as a high volume submitter, if you're paying for, to send business emails at scale, you know, even at a very small scale, you're paying something like 15 cents for a thousand emails.
So you're, you're paying one, 1000th of the price to send an email that you are to send a claim. And when you look at that from a data standpoint, the math kind of just doesn't add up. When you look at people being charged, you know, 1, 2, 2 1/2 percent for ACHs is that in other industries cost nothing or pennies.
[00:11:23] Stacey Richter: What I'm hearing you say is that elsewhere in every other industry whether you are a text message going back and forth, whether you are Amazon trying to talk to whatever you're trying to do, you're gonna pay 10, 15 cents for a thousand whatever data you're transmitting back and forth in order to do commerce. In this particular case, you're paying that 10 15 cents per. That sounds nuts.
[00:11:53] Zack Kanter: Yeah. Is it completely outta whack?
[00:11:54] Stacey Richter: Is there something special with healthcare or something like that that would account for this?
[00:11:59] Zack Kanter: Well, it's a great question because I think the answer to that is there, there is a lot that's special about healthcare, but it actually should work in the opposite direction. The things that are special about he healthcare should make it cheaper.
HIPAA, most people know if HIPAA is a compliance and privacy framework. It also did, among other things, establish something called the administrative simplification rules, which mandated that all the parties in healthcare use a set of standardized transactions, which are known as X12, but does not super important, standardized the eligibility, check the claim, claim status, electronic remittance advice, which is the information about the payment that came back.
And it said that everybody has to follow the specification exactly. And so yes, the specification is lengthy. You know, the specification for a claim might be 650 pages as a PDF. So it's complicated to build out. But what that means is that the transactions functionally look the same. And yes, there's payer specific differences, but when you talk about the difference between one of these two payers, transactions versus Amazon versus Walmart, it is a much, much narrower set of data that you have to work with.
So within that, there's also all these wonderful things, which people on the podcast might think this is strange to call these things wonderful things, but you know, like ICD-10 codes and CPT and CDT codes and HCPCS codes, which are, yes, they're may be cumbersome lists to maintain, but they are lists, they are things that everybody has to conform to. And we, we would've killed for things that in retail and logistics that say, look, here's a, for this particular field, here's what everybody has to use.
[00:13:28] Stacey Richter: So it's so interesting what you're saying that, you know, I asked if healthcare was special, immediately thinking that you were gonna say, wow, healthcare is more complicated and therefore maybe there's a rationale for why healthcare transactions should cost a thousand times more. And actually here we have the opposite.
That other, in other industries, it's very much the Wild West. They do not have these standardizations. Once you get the stuff set up, the transactions themselves should actually be less expensive because every single time you send a transaction, you're not sending it into the Wild West, hoping that somebody on the other side is using the same standard as you.
Like we have all this set up already. You're using the same electronic data transmission language. You've got lists of things like a code is a code. So, yeah, that was unexpected.
[00:14:14] Zack Kanter: And look, I think people often get the concept of simple versus complicated or complex versus standardized confused. Yes, things are indeed very complicated in healthcare. They're very complex in healthcare. There's many dimensions to it.
There's a lot of things you have to get right. A lot of things you can't get wrong. There's a lot of, you know, data fields that need to be passed back and forth, but it is standardized people in software love standardization because it means that when you're sitting down to solve a problem, yes, there might be 742 different fields that you need to deal with for a claim, but at least we know what we're gonna expect in there.
And it's, you know, what's called a bounded set as a bounded problem as opposed to an unbounded problem.
[00:14:50] Stacey Richter: What I'm hearing relative to this 10 to 15 cents a claim transactions that adds up to billions of dollars a year we have standardized codes.
We've got a standardized situation here that, you know, I can say a lot about HIPAA, but I guess this is a plus. Healthcare is a special in a good way. And yet oddly. And maybe this is foreshadowing. Oddly, it's a thousand times more to send a transaction.
Another thing that I have heard about healthcare, just if we're thinking through sort of the dimensions of this, another one is delays and just the inefficiency that could potentially be involved. Which I guess you know, maybe that's part and parcel to how people are managing to spend 10 to 15 cents a claim for something that should be a thousand times less if you are anybody else in the world.
How long do other industries take to process that bing, bing back and forth versus healthcare?
[00:15:41] Zack Kanter: Well, I think that this is where healthcare is, is ahead in some ways and behind in other ways. So when you look at the positive side of it is that much more is expected from a validation standpoint in these transactions. And with some exceptions, if you send an invalid transaction, so you send a claim that doesn't have a valid ICD-10 code. You're gonna get a rejection notice from, someone. Hopefully that's early on in the chain, but it might make it all the way to the payer in some cases.
And the payer, you know, maybe because the payer systems are very old, or maybe because the payer doesn't have a really big incentive to turn around a rejection very quickly, but you are gonna get a rejection notice that comes back. So you're gonna get something and hopefully it's gonna have a pretty good error message that's gonna tell you that ICD-10 code that you sent was nonvalid.
In other industries, that's not the case. So if you send a tracking number that's invalid in the world of logistics and retail, you might just not hear anything at all. And, and that transaction might never get paid. And you might have to, you know, then make a phone call and chase things down. And I'm sure people are thinking, well, I've had to make plenty of phone calls to payers. But from a rough coverage standpoint, there's a lot more covered in these automated rejection notices in healthcare than there is elsewhere.
Now, I'd say like the downside of this the transactions are nowhere near as fast as they could be, and they're not happening as as early as they can in the process. So people talk about some of these transactions being commoditized. A claim is commoditized. An eligibility check is commoditized.
To me, commodity means it's dirt cheap. In line with other industries. It's totally interchangeable and I think like we've already talked about it, the fact that it's not cheap is, is pretty obvious. We talk about it being totally interchangeable. If it were totally interchangeable when Change Healthcare went down, I think it would've been a nonevent.
But the bottom line is that you shouldn't have to wait all the way for a transaction to get to one of these destination parties, like a payer or a third-party administrator to find out that a code that you send is not valid or that there's an NCCI edit that was triggered or, or something like that.
You know, one, one of these basic claims validation rules, you should not have to wait that long.
[00:17:45] Stacey Richter: So if I'm thinking about a second kind of top line issue that we have in healthcare that we may not have in other industries, generally speaking in other industries, you send a transaction and maybe hear nothing. Or maybe you hear instantly.
That is not what we've got going on in healthcare. Sometimes it takes four to five days for a claim, a transaction to get dealt with.
Can you very specifically talk about where that four to five days comes from, and if we're comparing it to other industries, how does it compare?
[00:18:19] Zack Kanter: You have to kind of rewind the clock a little bit and think about how do we get here. It used to be the claims were sent via paper mail. And so the big effort of HIPAA, administrative simplification, sure, it was like there was some, you know, early beginnings of electronic transactions that they wanted to standardize, but they're really trying to get paper claims to stop being mailed and for paper checks to stop being mailed.
And so when you move from a paper process to an electronic process, even hearing back in a couple of days is great. And these are in the software world these are what's known as it's batch or asynchronous transactions to drop a bunch of files in there.
Who picks up these files? A clearinghouse that you work with maybe they look at for new files every 30 minutes, or maybe they look for new files every three hours, but like they're probably not looking for new files every two seconds. Despite the fact that that's entirely possible to do today.
The systems just weren't built to to do that at the time. Now, maybe the clearinghouses transmit those once they've picked up the files, maybe they put them into a queue. That then gets sent out every 30 minutes or one hour or three hours or six hours or 12 hours. Maybe they send them once a day.
Maybe they do that to save money. Maybe they do that because the compute is difficult for them to change at this point. You know, they, maybe they're running on an on-prem data center instead of in the cloud and they, that's how they have things set up.
In some cases, maybe the payers say, we don't want claims more than once a day, so you can't send the claims to us as you receive them. You have to batch them up.
Now the transaction goes from the clearinghouse to the payer, and now the payer has the same sort of listening job. Are they gonna listen for the claims in real time? Almost certainly not. Are they gonna listen on 30 minutes, 3 hours, 12 hours? Once every 24 hours?
And then when the transactions come back, it happens the same way on the way back. And of course, as it goes through the payer's adjudication process, and it's going through the various systems that the payer has, you know, each one of these things can be set up on a batch job.
So when you kind of think about this, imagine you're going through a series of train stations. You're traveling coast to coast, and the train leaves once a day. If you line these things up perfectly, you might have a pretty quick trip. If you don't line these things up perfectly, you, you might be facing a very long delay. You get there one minute after the train has left and now you're waiting almost 24 hours for the next train stop.
[00:20:25] Stacey Richter: One of the questions that we're gonna circle up on is how did we get here and why, and what's it gonna take to fix it?
Legacy Systems and Market Failures
[00:20:32] Stacey Richter: And, and I think I am definitely cottoning onto the notion that we've got legacy processes here. We've got legacy systems.
[00:20:39] Zack Kanter: One piece on that you have to think about, like, oh, a day, a 12 hours, 2 days, this, that every one of those days is a day that the provider needs to wait to get paid so that that is another day of receivables. That is another day that they're having to float that cash in order to get paid. And this is, this is a huge problem. This is like the day really matters.
[00:20:59] Stacey Richter: Well, and then from a patient standpoint, this is another day where a patient doesn't know whether their pre-auth is approved or whatever.
So this is another delay in cancer care. This is another delay in should we actually do the MRI? This is another delay, right? Like, so these are to your exact point. That was an excellent add. That this is not just some kind of technological move and freight around this. This is people we're talking about.
[00:21:21] Zack Kanter: It's another day that the patient might have moved. Now the patient might have forgotten what the procedure was about and reduces the chances of collecting the remaining patient financial responsibility. I think like you can start from the position of saying these things should be real time. These things should be ultra cheap and they should be real time.
And I think that you should work backwards from that premise. And now we can talk about why that isn't the case. You know, is, is the payer gonna pay this claim because that has to go through some sort of a clinical review. Sure. That is outside of the scope of this. But for the basic validation rules of which there are tens of thousands technical rules, these things should be instant.
[00:21:55] Stacey Richter: No matter what we're doing, if you're just adding random days for no reason other than technological inefficiency, it would seem to be something that everyone would have eyes on fixing. It actually will improve patient care.
We're not talking about removing administrative stuff that negatively impacts patient care. This is not what we're talking about here. We're talking about improving efficiency to improve patient care and reduce costs.
[[Okay, let's level set where we are in this conversation. We've talked about two issues so far. These claims, transactions back and forth between providers and payers that go through clearinghouses, they are Number 1, expensive, a thousand times more expensive than other industries adding up to five to seven billion dollars a year when the cost should be something like 90% less as compared to other industries where transactions are actually harder and less standardized.
And then we have Number 2, where we are in this conversation. These transactions take longer if there's no clinical reviews or manual labor required, they should be instantaneous, and yet they take days.
Now, look, this is a technology problem, except it's not a technology problem, it's an incentives problem. No one is going to fix technology they have an incentive to keep crappy. Listen to the show with Preston Alexander about how much payers make in the float.
And also the most recent show with Dr. Eric Bricker. He says the same thing. It's all about the time, value of money, baby. You keep billions, trillions of dollars for a few extra days. Or 41 days on average, as the case may be. You make an extra 10 to 20% in profit across a year.
You get lots of swagger as they say, and consider the swagger in the context of who owns one or more of the big clearinghouses? Oh, right. A payer.
And also there are other clearinghouses who have a few very large payer customers who are in the middle passing on the costs of these transactions as part of their MLR, their medical loss ratio. These are considered medical expenses, thereby driving up the costs that are the basis for how much profit they can make.
Because don't forget, if a payer can only make 15ish percent profit over medical trend, then the higher the medical expenses, the more profit they can make. Right?
Many of you know this already, but yeah, the technology is the fix. But it is also to some extent not the problem, or at least knowing how to fix the technology is not the problem.]]
And then, you know, just given all the, exactly what we, we've just been talking about with these transactions that are costly and take a while, I am also understanding that a third issue is they're opaque and there's some lack of transparency here.
[00:24:41] Zack Kanter: You know, asking a question of, “Hey, how much visibility does somebody on the provider side have into a claim that gets processed.” A lot of frustration with people who are using both a clearinghouse and, and you know, the majority of EHRs require that you sign up with an external clearinghouse and, and these systems are not well integrated.
Like it's a, a claim gets generated inside your EHR and then it gets dropped into the clearinghouse. When something goes wrong, it's just this kind of split brain problem where it's a bit ambiguous as to where the problems are occurring and why exactly these things are happening. In other cases, someone might be using a a system where the clearinghouse is totally obscured and they may not even know what a clearinghouse is.
This might be the first time you're hearing about a clearinghouse if you are using one of these systems that has all of this packaged under the hood, and I think that, again, to come back to the legacy nature of a lot of the clearinghouse systems or all of the clearinghouse systems that are out there, they don't afford the same level of deep systems integration that you would expect out of a modern piece of software.
[00:25:43] Stacey Richter: And from a patient perspective or a physician perspective, that would be really frustrating. Or plan, even a plan sponsor perspective because you're like, well, what's the status of X, Y, and Z? And it could be at any one of those train stops along the way, like you can't query the system and discover that it's held up here.
We've determined that these transactions are expensive. They're relatively slow, or could be you've got bits and bytes that are flying around within multiple legacy systems, despite the fact that they should be standardized.
So you should be able to say, oh, they're standardized, so it should be a commodity that is a. In fact, not true. Therefore, could take four days for a, you know, something that should travel at the speed of lights to make it there and back.
And then there's a lot of opacity and lack of transparency within the system, simply because, again, where is my little packet of information? When did it get batched up? When did it get sent out? Where is it? Who has it? Are we there yet is kind of my takeaway from this whole thing.
So if we're talking about what should be happening here,
I am a doctor. I have submitted a service. I wanna know how much my patient should pay versus how much I'm gonna get paid. So I go in my EHR, my practice management system, and I type in the code and my patient name and what should happen right now, like follow that piece of data like through the cha ching, cha ching, cha ching.
What, how should this work?
[00:27:10] Zack Kanter: I would say, look, the, the way it should work, it could be a doctor who's submitting their own claims, or it could be professional revenue cycle management person. It should be that everything in real time. The moment that you, you click a button that says validate. In your, in your EHR clearinghouse, whatever it is, you should get 100% of the things that can be validated without the payer's input should be validated right then and there, and that seems fairly straightforward.
This is, you have, yes, there's tens of thousands of rules that apply, but it should never be that you submit a claim and then you find out three days later, hey, that the patient didn't have active insurance on that date. You can, you know that from the eligibility check. You should never find out 12 hours later or three minutes later that the ICD 10 code was not valid.
You should be able, you should know that in real time, you should never find out more than instantly, you should never find out that the claim totals don't balance. That if you have two lines that are $10 and the total is $30, that validation should be very cheap. And then when the claim is submitted, the claim should be you know, of course you can't change the payer's adjudication system, and if that's gonna take days to adjudicate, that's out of the control. But, but everything that is what we say, deterministic, that can be evaluated through a set of rules, should be evaluated instantly.
[00:28:21] Stacey Richter: And if we're thinking about things that are deterministic, that should be validated by a set of rules. If I forgot to fill out a field that is not optional, I should immediately get a ping back that said you forgot something. If, as you said, if, if the patient actually doesn't have enforce coverage, then that should come back super quick. If I mistyped in ICD-10 code, that should come back quick.
Are there any other big examples of just things that happen all the time that it takes multiple days for somebody to figure out are wrong that shouldn't, this is a business rule.
[00:28:54] Zack Kanter: Yeah. Look, we're kind of going through the obvious ones here 'cause they're easy to, easier to explain. There's a lot of things that can be solved.
But you look at things like certain ICD-10 codes don't belong to certain genders or to certain ages, or you look at, medically unlikely scenarios. If you're, you know, a podiatrist, you probably shouldn't be giving a cardiology diagnosis. There's like a bunch of things that if not deterministic or pretty close to deterministic.
But I think the point is that it's not like there's three or four of these big rocks that, that there's thousands of them, thousands and thousands of them, and they should all be returned instantly.
[00:29:28] Stacey Richter: Like if there aren't these business rules then from a provider standpoint, from a patient standpoint, even from a health plan perspective, like this is when mistakes get made. This is when again, minutes turn into hours, turn into days, and cost starts to increase.
You can just think about the spiral of inefficiency that's created by some of these delays. If you knew about it while the patient was sitting there, then things could happen that now can't happen multiple days later.
[00:29:54] Zack Kanter: Exactly. Right. And look, if you're running on Epic, does Epic have many or most of these things covered? Maybe. But if these things are not getting captured by the EHRs, whether they're small or large, or they're not getting captured by the clearinghouses and they're having to get to the payer's second or third level of claims edits you, you're just, this is just waste.
It's dollars, it's days. It's not to mention all the time that people are spending recreating all of this business logic over and over and over again. There's so many different entry points to a claim. And that's why the clearinghouse is kind of the right place to solve this because the clearinghouse should be able to return all of these things instantly.
[00:30:28] Stacey Richter: It sounds like what an ideal world looks like would be somebody over at the clinical practice types in something they want to get adjudicated. What winds up happening is that automatically whoop, whoop lickety-split goes over to the clearinghouse.
The clearinghouse programmatically is able to recognize somebody forgot to add something or all of the different rules-based sorts of things that you were talking about instantly, because this is two pieces of software talking to each other, like some error message on the computer or on some website. Therefore I can fix it and resubmit it.
If there is something which is automatically approvable or whatever, I immediately know that whatever can be, again, there's plenty of use cases, etc, that require clinical review or whatever. Not talking about anything like that. We are basically just talking about things should happen at the speed of data.
The clearinghouse is what sits in the middle here, so the clearinghouse is sucking in all these rules from the different payers or TPAs or whoever, and then being able to immediately disseminate that out on a case by case basis to the provider organizations who are trying to get their stuff adjudicated.
If we think about though, what happens in the real world? And a lot of this has had some foreshadowing for sure. But if we think about what happens in the real world, you are using words like legacy systems that used to be paper. Why are we in the place that we are at?
[00:31:51] Zack Kanter: Have claims costs and eligibility checks, costs come down over the last 20, 30 years. Yes, they have come down. But they have not come down in line with other industries, so we can bring all of these costs down. When you have something that's out pacing, inflation out, pacing GDP, there's just not the downward pressure, but what people don't always put together is that means that there's a lot of people who are making a lot of money.
That might not be the doctors and the nurses, but like certainly those, there are profits being generated and those profits are going somewhere.
And yes, I think there, there just haven't been very many new clearinghouses started. Stedi is the first clearinghouse in the last 10 years. And I say that kind of just to be safe, but it's, it's a lot longer than that. And the other clearinghouses that are out there were built generally is a series of acquisitions.
So if you look at the acquisition history of many of these businesses to get to scale, they went and they acquired other clearinghouses or revenue cycle management businesses and they put them together. And a lot of times those tech stacks, you know, the, the code bases were never, and the infrastructure was never modernized.
Ideally, what you want when one company buys another company or two companies merge is they get put on the same system. But that's a very expensive effort. You know, private equity can be a wonderful thing, but if you have private equity owners and there's not really a clear payback period on these things, now you're left with 7, 8, 9 different legacy systems and you don't really know how those systems work. They're hard to improve.
And then I think the third piece is that when you look at the cost of starting one of these clearinghouses from scratch is very, very high. There's thousands of payers. That means there's thousands of connections that you need to build. You have to build the two-sided networks.
You have to build connections on the, on the payer side and get the payers opt into your, to your network, so to speak. You have to sign up meaningful numbers of providers and because you need the claims volume and the eligibility call volume in order for the payers to be willing to work with you.
You have thousands of validations that you need to be supporting and get to some critical mass of these in order for providers to be saying, yeah, you know what? It's at least as good as the clearinghouse that I'm using today.
So I think that to some extent there's just been a market failure of an unwillingness to to start or fund a clearinghouse because it's gonna take a very long time to build.
Now it's one of these things that you're very glad to have done because now we have the clearinghouse, and now we have the modern infrastructure and all these things, but it took years to get there. This is not something you can build overnight.
[00:34:05] Stacey Richter: It definitely underscores the whole market failure. Because if we don't have a market in healthcare then, and no one's competing on price, then you can actually have an expanding middle layer and kind of no one notices, especially if we're again, just inches turning into miles.
What winds up happening is you achieve scale. Like how you make more money is you achieve scale. But how you achieve scale is you cobble together a bunch of acquisitions, but then once you cobble together a bunch of acquisitions, if you don't actually spend a whole lot of money to get everybody on the same platform, which why would you like, there's no market incentive to do that. You already have the volume.
And if no one is necessarily keeping track of the fact that your transactions cost a thousand times more than any other industry, why? There's no, why there? If we're thinking about this from a, “I’m trying to make money perspective.” If you are a legacy player and you've already achieved scale. So all that makes perfect sense.
[00:34:59] Zack Kanter: If I could add one thing, the vast majority of the actors in the system, the payers, the providers, the clearinghouses, the EHRs, they're working hard every day and are fighting complexity. They have a lot of legacy systems to maintain. They have quarterly goals that they have to hit.
They have changing payer requirements. They have their hands full. The lack of competitive pressure, in some cases has caused some of these competitive dynamics to atrophy, and I think that that is a temporary situation that is being fixed now.
Advice and Solutions
[00:35:28] Stacey Richter: What's your advice? I'm thinking to myself, I would prefer not to spend six to $7 billion a year when I could spend a thousand times less than that as an industry.
[00:35:37] Zack Kanter: People should be looking at their clearinghouse costs.
If you are paying a clearinghouse bill, you should be looking at your clearinghouse cost. And now if that means if you're a provider, I think that means if you're a payer, if that means you're a TPA. If that means you are an EHR system that is paying clearinghouse bills.
If you are paying a clearinghouse bill. I think that those are things worth looking at and saying, you know, if I really do believe that this is a commodity transaction, am I paying commodity prices and are there other options that are out there?
Plan sponsors are gonna be a little bit removed from this, but I think it's important that people are aware of these things because I think you should just be aware of, of where the waste is happening and, and what's being done to address it.
[00:36:14] Stacey Richter: So what I'm hearing you say is that if you are in the mix of these healthcare transactions directly, like for example, you're a TPA, you're a payer, you're a provider organization who's trying to figure out which EHR system to use or buy, or your EHR system gives you an option. Really think about what's going on with this clearinghouse on the other side of the table and, and how much are those individual transactions.
But if I'm a plan, sponsor, and I'm trying to put together a high-value network. To be frank, this is important stuff here relative to serving patients and patient excellence because if it could take a minute and a half while the patient is there, and instead it takes five days after the patient already left this administrative inefficiency, to your exact point, these are inches that become a mile.
Conclusion and Contact Information
[00:36:59] Stacey Richter: So talk to me about Stedi and what you're doing over there. What do you want people to know and where could they go for more information?
[00:37:07] Zack Kanter: Stedi is a healthcare clearinghouse.
We have a particular specialty in working with technology forward organizations. It's easy to integrate with us as a software developer. We are a direct competitor to the other clearinghouses that are out there, we're very happy just to work with people on their most difficult transactions, show people the difference that a modern technology infrastructure can make.
[00:37:31] Stacey Richter: Zack Kanter, if someone is interested in learning more about having Stedi helped them with their hardest transactions or anything else that we talked about today, where would you direct them for more information?
[00:37:40] Zack Kanter: They can go to our website, stedi.com. They can find us onLinkedIn.
They're welcome to reach out to me directly as well.
[00:37:49] Stacey Richter: Zack Kanter, thank you so much for being on Relentless Health Value today.
[00:37:51] Zack Kanter: Thanks for having me. This was great.