Automation Saves Money — but Organizations Need a Clear Way to Measure It
Every healthcare executive knows administrative tasks consume enormous time and cost.
But when exploring automation, leaders naturally ask:
- “How much will we save?”
- “Where does the ROI actually come from?”
- “What assumptions should we use?”
- “How do we justify automation to finance or the board?”
This article outlines a simple, defensible model for calculating cost savings and ROI from automating back-office workflows such as:
- Prior authorizations
- Referrals
- Eligibility checks
- Fax intake
- Documentation
- Patient registration
- Denial prevention
- Billing and coding support
Let’s break it down.
The 4 Major Buckets of Automation Savings
Automation generates measurable savings across four major areas:
- Labor Cost Reduction
- Denial Reduction & Revenue Protection
- Throughput Improvements (More Visits, Faster Care)
- Error Reduction & Rework Prevention
Below is how to calculate each bucket using real operational data.
1. Labor Cost Reduction (The Most Direct Savings)
Most administrative processes are manual, repetitive, and time-consuming.
Examples:
- Each prior auth: 10–40 minutes
- Each referral: 5–25 minutes
- Eligibility check: 3–12 minutes
- Fax indexing: 10–20 minutes
- Chart prep: 5–15 minutes
- Coding review: 5–20 minutes
Savings Formula:
(Task volume per month) x (Minutes saved per task / 60) x (Avg hourly labor cost)
Example:
If a clinic processes:
- 1,000 prior auths/month
- Saves 20 minutes per PA
- Staff cost = $22/hour
Savings = 1,000 × (20/60) × 22 = $7,333/month
= $88,000/year from PAs alone.
Multiply across referrals, eligibility checks, faxes, chart prep, etc., and savings quickly grow into the hundreds of thousands.
2. Denial Reduction & Revenue Protection (Often the Largest ROI Driver)
30–40% of denials are preventable.
Many stem from:
- Missing documentation
- Incorrect eligibility
- Wrong or expired PA
- Missing clinical notes
- Coding errors
- Timely filing issues
Automation fixes these upstream.
Savings Formula:
(Current annual preventable denial dollars) x (% reduction from automation)
Typical Reduction:
Automation can reduce preventable denials by 30–60%.
Example:
If the group has $5M/year in preventable denials and automation reduces them by 40%:
Savings = $5,000,000 × 0.40 = $2,000,000/year
This is often the single biggest financial impact.
3. Throughput Improvements (More Visits, Faster Authorizations)
When back-office efficiency improves:
- Patients get scheduled faster
- PAs are cleared sooner
- Referral leakage decreases
- Providers spend less time waiting on documentation
This increases clinical throughput.
Savings Formula:
(Additional visits per month) x (Avg revenue per visit)
Example:
If automation enables even 50 more visits per provider per year, and each visit generates $150:
Savings = 50 × 150 = $7,500/provider/year
Multiply across 20–50 providers, and the ROI becomes massive.
4. Error Reduction & Rework Prevention
Manual workflows create errors that require:
- Staff rework
- Resubmission
- Additional documentation
- Payer follow-up
- Corrected claims
- Provider frustration
Automation reduces these errors dramatically.
Savings Formula:
(Volume of rework tasks/month) × (Minutes saved) × (Hourly labor cost)
Example:
If your team spends:
- 400 hours/month on rework
- Automation reduces rework by 50%
Savings = 400 × 0.50 × $22/hr = $4,400/month
= $52,800/year
Bringing It All Together: A Complete ROI Model
Let’s look at an example mid-sized specialty group.
Annual Savings:
CategoryEstimated SavingsLabor reduction$600,000Denial reduction$1,800,000Throughput gains$250,000Rework reduction$75,000
Total Annual ROI:
$2,725,000 per year
Even for smaller groups, ROI is typically 5×–20× the automation cost.
Cost Savings Are Highest for MSOs and Rollups
Multi-site organizations see outsized benefits due to:
- Higher aggregate volumes
- Standardized workflows at scale
- Centralized RCM teams
- Shared services models
- Acquisition-driven growth
For MSOs, automation doesn’t just save money —
it reduces the cost of integrating new practices into the network.
How Honey Health Helps Organizations Calculate Savings
Honey Health provides:
✔ Detailed pre-implementation ROI modeling
✔ Workflow time-study analysis
✔ Denial pattern assessment
✔ Volume benchmarking across specialties
✔ FTE efficiency modeling
✔ Throughput and revenue forecasting
✔ Multi-site variability analysis
✔ Executive-friendly financial reports
This helps CFOs, COOs, and PE operators make data-backed decisions before implementation — and measure performance after go-live.
Bottom Line: Cost Savings From Automation Are Clear, Measurable, and Substantial
Automation reduces costs by:
- Replacing manual administrative labor
- Preventing costly denials
- Increasing clinical throughput
- Eliminating rework
- Improving operational efficiency
Most organizations see ROI within 3–6 months, with savings compounding over time as automation expands across additional workflows.
