Automated Processing Pays Off

Health insurers are counting on technology to reduce the claims-processing errors that cost billions of dollars and frustrate patients and physicians.

Insurance Networking News, May 1, 2012

Bob Violino

For many health insurers, enhancement of the claims process is overdue. According to the American Medical Association's (AMA) fourth annual National Health Insurer Report Card released in 2011, the overall rate of inaccurate claims payments increased from the previous year among leading commercial health insurers.

Claims-processing errors by health insurance firms cost billions of dollars and frustrate patients and physicians, the AMA says. The report findings show that commercial health insurers had an average claims-processing error rate of 19.3 percent, an increase of 2 percent compared with the prior year.

The increase in overall inaccuracy represented an extra $3.6 million in erroneous claims payments, and added an estimated $1.5 billion in unnecessary administrative costs to the health system. The AMA estimates that eliminating health insurer claims payment errors would save $17 billion.

While claims automation might not totally eliminate claims errors, it does reduce them and helps insurers cut costs, experts say. And more health insurance firms are deploying technology to automate processes.

"Based on conversations I've had with people, whether it's from the vendor or health plan communities, this is a growing concern in health insurance and carriers are actively looking to change their legacy platforms and implement these solutions for a better, more streamline approach," says Kunal Pandya, senior analyst, Health Insurance and Payments, at research and advisory firm Aite Group.

"The top players are already doing a great job; they've been looking at claims automation to bring costs down and to make the processing of claims more effective," Pandya says. "The tier-two and three players are still getting to know these systems better or are in the process" of implementing them.

For many insurers, claims are still being processed largely on a manual basis, Pandya says, and those firms should be eager not only to reduce errors but reduce the cost of processing.

"Claims transactions are very complex from origination to payment," Pandya says. "The processing involves multiple financial and non-financial transactions that go into processing one claim."

Manual processes might cost about $9 per claim; whereas it's less than $1 for electronic processing, Pandya says. Those costs include staff resources, postage and other factors, he says.

Claims Excellence

Blue Shield of California in San Francisco has developed a program called the Partnership in Operational Excellence and Transparency (POET) to help more than 180 hospitals in its network enhance the claims process.

At the heart of POET is a Web-based dashboard provided by MedeAnalytics Inc. that displays a rolling 36 months of finalized claims data, including details on cycle time, submission types, denial reasons and appeals.

The dashboard, which is designed to report key performance indicators customized for each provider, provides the transparency necessary for Blue Shield and its providers to have open dialogue, identify the root cause of issues, and collaborate on workflow improvements, says Rob Geyer, SVP for customer operations at Blue Shield of California.

Blue Shield piloted the POET program with the MedeAnalytics tool in January 2008 and launched it later that year.

Before using the MedeAnalytics technology, "we were ill-equipped to quickly respond to ad-hoc requests from hospitals for claims data," Geyer says. "Without easy access to operational data, claims and network management representatives were spending many hours manually compiling data upon request, draining administrative resources."

This inefficiency and lack of operational insight left the organization unable to effectively address claim settlement demands, and hurt its ability to negotiate competitive rates during contract talks, Geyer says.

Between 2008 and 2011, Blue Shield contracted hospitals have seen their claim denials decrease from 23 to 17 percent, their electronic data interchange (EDI) submission rate increase from 85 to 90 percent, and the claim cycle time decrease from 31.9 days to 28.1 days, Geyer says.

In 2010, the Hospital Association of Southern California (HASC) saw the value of POET and invited Blue Shield to co-facilitate a workgroup to develop industry best practices in revenue cycle management, Geyer says. By the end of that year, hospitals that participated in the workgroup and made changes in billing practices sped up the time from patient discharge to payer claim receipt by up to five days.

Blue Shield of California in November 2009 began using a product called NetworX Pricer from TriZetto Group Inc. to support the pricing and automation of complex contracts and claims processing for hospitals, ambulatory surgery centers and dialysis centers for PPO and HMO claims.

"NetworX Pricer improves our auto-adjudication rate and auto-pricing rate," Geyer says. In addition to conducting extensive testing to ensure that NetworX Pricer performed efficiently, Blue Shield worked with providers to make sure the terms and methodology used in contracts could be supported by Pricer.

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