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Data extraction software vs. data entry outsourcing companies

Julianna Rice
August 26, 2022

Over the last few years, we have seen a huge improvement in automated data extraction techniques. Historically, there have been issues with accuracy and data outside of specific fields and/or boxes was often missed. Consequently, attempts to automate data extraction from CMS-1500 forms were counter-productive, due to the relatively low accuracy rates. This led to a significant increase in healthcare outsourcing in areas such as medical insurance claims. Thankfully, times have changed.

Before we take a look at the pros and cons of data extraction software against data entry outsourcing companies, what is a CMS-1500 form?

CMS-1500 claim form

A CMS-1500 claim form, sometimes referred to as a HCFA 1500 form, is an industry standard medical insurance claim form. This type of form is used by doctors, practices, nurses and other medical professionals such as therapists and chiropractors. While CMS-1500 claim form instructions are relatively straightforward, there is one problem: many of these forms are handwritten, typed, or a mix of both. As a consequence, it has previously proven challenging to accurately convert this information using data extraction software, because it requires both optical character recognition (OCR) and intelligent character recognition (ICR) capabilities.

When looking at medical insurance claim forms, you will likely come across the UB-04 claim form which is used by institutional providers for medical and mental health claims. A UB-04 form is used to gather similar information to a CMS-1500 form, ready for processing.

See also: How the CMS-1500 Form Became the Industry Standard for Medical Claims

Collating medical insurance claim data

The healthcare outsourcing industry grew significantly prior to the introduction of artificial intelligence and data extraction software. Healthcare business process outsourcing (healthcare BPO) became an extremely lucrative business. Data entry outsourcing companies were able to take on simple data entry processes, leaving insurance companies to focus on more challenging activities.

The introduction of artificial intelligence (AI) in the shape of Cognitive Process Automation (CPA) and Robotics Process Automation (RPA) has been embraced by the medical insurance sector. We have first-hand knowledge of this sea change in the industry as a consequence of our Digital Coworkers, and the growing take-up of artificial intelligence-based data extraction.

See also: How Does Automation Benefit the Insurance Industry?

Pros and cons of data extraction software

When looking at the pros and cons of data extraction software, there are a number of issues to consider.

The pros of data extraction software

The pros include:


While there are short, medium, and long-term cost benefits, compared to data entry outsourcing companies, these are enhanced by the use of artificial intelligence. Cognitive solutions not only automate the process, but they are also constantly learning and enhancing value.


Roots Automation’s Digital Coworkers provide a 99% straight-through processing rate. This minimizes the need to check and double-check data entered. This reduces the cost and processing time.

Data gathering

While data extraction techniques have been around for some time, historically they struggled when information was not in a specific box or field. Using AI with optical character recognition (OCR) does not require such accuracy on the form and is much more flexible in recognizing and picking up data.


As you might have guessed, the speed of processing using an AI system is significantly greater compared to human data entry. Typically, one of our Digital Coworkers will work between 400% and 800% faster than a human.

Reallocation of resources

While data entry is a very important element of the medical insurance claims process, it is cumbersome and time-consuming. The use of AI allows the reallocation of resources to customer facing and revenue creating activities.

Data protection

When creating our Digital Coworkers we have a library of parts and processes available for specific actions and industries. As they run side-by-side existing systems, everything remains in-house, enhancing data protection. Data protection has become an integral part of the business world of late with significant fines for breaches of the regulations.

The cons of data extraction software

In all honesty, there are a few drawbacks in using reliable AI data extraction processes. Some issues to be aware of include:

Initial cost

One Digital Coworker typically costs the same as an employee’s annual salary. While there is an initial cost when introducing AI data extraction procedures, on average they create a 250% return on investment and one single bot does the work of 4 to 8 people. Your company will reach the breakeven point in a matter of months, not years.

Process driven

Digital Coworkers will continuously learn, adapt, and improve processes, but there needs to be an initial process to follow. Well organized and efficient medical insurance companies will already have these processes in place.

See also: The Importance of Standardization in the Age of RPA

Learning process

Here at Roots Automation, we take on the task of building Digital Coworkers sculptured around your processes and your requirements. While there is an initial “learning period,” this is just a matter of weeks after which the system will be fully automated. Typically, the process is 6 to 8 weeks from purchasing a Digital Coworker to your new favorite employee’s start date.


Even with modest start-up costs, and a relatively short training period, AI data extraction processes will immediately improve efficiency and have a relatively short payback period. It is the ability to constantly learn and adapt that enhances short-term value to your business.

See also: A Day in the Life of Just Another Coworker

Pros and cons of data entry outsourcing

In isolation, there is no doubt that the use of a data entry outsourcing company can enhance the returns and efficiency of many medical insurance companies. The introduction of new technology, especially AI, has reduced these benefits and returns. However, there are still pros and cons to take into consideration.

The pros of data entry outsourcing

Healthcare outsourcing is a huge industry with numerous pros including:


There is an obvious cost saving when considering in-house data entry compared to insurance BPO services. While for many companies this cost benefit has been eliminated because of AI data extraction processes, it is still a consideration for some.

Input accuracy

When using the services of a healthcare outsourcing company, you would generally expect a higher level of input accuracy with more specialist workers. As a consequence, the level of checking required compared to in-house data entry should be lower.

Reallocation of resources

Data entry is time-consuming and can be relatively expensive compared to more customer facing and sales related activities. Therefore, the outsourcing of data entry to a third party should free up additional resources to expand the business.

Responsibility for data entry workers

Responsibility for data entry workers will remain with the data entry outsourcing company. This should limit liabilities for data entry workers who often encounter medical issues such as repetitive strain injuries.

Cons of data entry outsourcing

In its day, healthcare outsourcing was a useful means of enhancing profit margins and focusing on more lucrative activities. However, compared to current services there are a number of issues to be aware of:

Offsite data entry

We know that a number of US medical insurance companies use outsourcing services in India and the Philippines. As a consequence, data processing will be carried out offsite. This reduces a company’s degree of control over client data which can be challenging under ever stricter data protection regulations.

Data protection regulations

As we touched on above, there can be data protection challenges when confidential client information is transferred to another country/company. Ultimately, the medical insurance company will be responsible for the security of all client data and appreciation of the relevant regulations.

Speed and accuracy

Historically, we have seen numerous different data extraction processes, some of which were speedy but less accurate, others were more accurate but less speedy. We have created Digital Coworkers which we build and train to your specific requirements. They not only bring together speed and accuracy, but also an ability to “learn on the job.”

While we appreciate there is some skepticism at the growing use of AI, in reality these systems have been around for many years in numerous forms. The enhancement of profit margins – with improvements in accuracy and speed – has had a positive impact on the outlook for many companies. Even though there are numerous benefits in the use of data entry outsourcing companies, compared to in-house services, these benefits are enhanced by the use of AI.


Here at Roots Automation, we have strong working relationships with all of our customers, creating Digital Coworkers built around in-house processes with continuous enhancements. Aside from the cost, accuracy and speed benefits, for many it is the opportunity to reallocate resources to client facing services and the growth of sales. You will not only feel an immediate benefit, but this will be enhanced as your Digital Coworker continuously evolves alongside your business.

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