Why American Healthcare is Ready for Blockchain — Part II
Part I of my previous article discussed why the American healthcare system is ready for blockchain in broad terms. Why the structure and current competitive environment make perfect storm ready for blockchain adoption. What I didn’t do was give a specific example of how. Today I’ll walk through one area that has a specific measurable financial impact from blockchain — and I’ll use it to show how we measure the dollar value of Veristakes (VRS) on our platform.
The claims process is the term I’ll use throughout this article when referring to how a healthcare provider provides a service, submits the bill to an insurance company, and then is ultimately paid. Executing this process across all providers and payers in the country is estimated to cost over $59 billion yearly. The portion of this process we will examine today is when a claim (or bill for healthcare service) is sent to a payer (typically an insurance company). The Centers for Medicare and Medicaid (CMS) performed a study on this process in 2015 when switching the underlying system to a new system for coding diagnoses. The results are summarized in the table below:
During the first 27 days of October 2015, CMS had 4.6 million claims submitted for payment. Of those 4.6 million, 2% were rejected to invalid or incomplete information. Claims are typically rejected for invalid or incomplete information when a piece of information from the patient/payer relationship is omitted such as policy number, social security number, etc. Two percent may seem like an insignificant number, but annualized this amounts to 1.24 million claims a year. Now consider that Medicare claims are approximately 20% of all claims submitted in a year. This leads us to suspect that up to 6.2 million claims a year are rejected to incomplete or invalid information. Which leads to our next question :
What is the cost of a claim rejected due to incomplete information?
Earlier in 2017 Change Healthcare issued the results of their study attempting to answer this question. What they found was that each claim denial costs providers an average of $118 per claim. This expense is across all denial types, of which all others are more complex than invalid or incomplete information types. If we assume that the expense associated with fixing invalid claims are the lowest of all claims error types, it would be conservative to estimate the average expense at $20. This expense would represent physician office staff processing the denial, looking up the correct information, and resubmitting with the correct information. This is a conservative estimate which results in an average yearly expense of $125 million dollars.
The Veris blockchain solution removes the possibility that a claim would ever be rejected for invalid information. All patient/payer contracts exist on chain in the form of a smart contract which populates a claim form with the correct information to be submitted for processing of the claim.
Everyone using the Veris platform will eliminate this expense.
It is not possible to submit an invalid claim as the contract will not exist in disparate systems where one side (patient/payer/provider) may not have all of the correct information.
This is one of the very specific, and frankly basic, use cases of the our blockchain. Numerous examples exist in the claims processing space alone within our healthcare system. This does not touch on other areas in healthcare such as pharmaceutical tracking, patient records, and population health.
The last thing I should note is the ability to specify financial measurables to our platform allows us a powerful inference. That is we can begin to quantify the value created by the Veris platform, and reflect itin the value of our Veristakes. Claims rejected due to invalid information are just a small piece of of the expense in the American healthcare system, but full adoption of the Veris platform will result in an expense savings across all providers and payers of $125 million a year. This can be used to project the value of holding Veristakes (VRS). If all 50 million VRS are in circulation this would mean that each VRS is worth the value of a annuity at $125 million/50 million. Or in other words a perpetuity of $2.50. The present value of a perpetuity is shown in the illustration below
By calculating the expense saved by eliminating all claims rejected due to invalid information we arrive at a maximum value that can be obtained from utilizing the Veris platform for eliminating this type of error.
$83.33 for eliminating 3% of the total expense of the claims process.
This is how Veris defines and measures the Internet of Value.
This is how Veris brings value to the American healthcare system.
Note that we are using 3.0% as our discount rate in this calculation. This represents a conservative estimate as the current discount rate for the US Federal Reserve is 2.0% for primary credit. A lower discount rate increases the value of VRS, a higher rate reduces the value.
