modern Payment Integrity the race to pre-payment White paper

Transcription

1 modern Payment Integrity the race to pre-payment White paper

2 White paper modern payment integrity the race to pre-payment U.S. Healthcare Spending Chart FY $ Billions Actual Estimated As one of the most regulated industries in our country, plans have for years faced challenges they have simply intensified recently. It is an unsettling time for Healthcare Payers. Standard & Poor's noted in a 2010 Report Card on the industry that, [K]ey challenges for U.S. health insurers include contending with tough competitive conditions, the increasing risk of regulatory scrutiny of pricing and responding to developments associated with the next stage of healthcare reform. Over the past year, there have been numerous articles noting either increased scrutiny 1 or outright rejections of price increases proposed by Health Plans by regulators. In addition, recent reports indicate that health plans may have to pay as much as $1.3 billion in rebates to insured groups under the minimum Medical Loss Ratio require- 2 ments. Also, as the economic downturn that began in 2008 has progressed, government payers, including state Medicaid programs in particular, have pushed to decrease the amounts paid in connection with these Programs, which can further squeeze margins. And the challenges do not stop there under the Patient Protection and Affordable Care Act (PPACA), Health Plans must come up with new models (to accommodate ACOs and similar structures) and new ways of doing business that are more efficient given floors on medical loss ratios, while still upgrading legacy systems for things like ICD-10. The Genesis of Payment Integrity Of course, such pressures on health care payers are not new. As one of the most regulated industries in our country, plans have for years faced challenges they have simply intensified recently. Because of these myriad pressures, health plans must actively seek opportunities to improve operations. One key component is to pay claims accurately experts agree that payers make significant and systematic claim overpayments largely as a byproduct of an extraordinarily complex healthcare delivery 3 and reimbursement system. There are many sources of such inaccurate claims payments, including: Complex coding systems and rules, including periodic changes and updates to such methodologies, Lack of staff training in billing at provider offices, Efforts by providers (and consultants) to increase reimbursement through robust billing and coding, Payer's problems in accurately loading varied information into diverse systems, Errors in configuration of payer claims processing systems, Intentional fraud by providers, groups, and members to receive coverage or reimbursement beyond that to which they are entitled, Manual errors by claims processing personnel, and Lack of knowledge of other possible responsible parties (third party liability). 1 See State Angers Insurers with In Depth Rate Review Audits, Fierce Health Payer, February 20, See Insurance Rebates of $1.3 Billion Could be on the Way this Summer, Report Says, The Washington Post, April 26, See The Problem of healthcare Fraud, National Healthcare Antifraud Association website, 1

3 3-10% amount lost to fraud, waste, abuse and error 3%-7% 97%-90% 90-97% all amounts paid on healthcare claims Source: The National Health Care Anti-Fra Association (NHCAA). Given the amounts at issue by some estimates 3-10% of all amounts paid on healthcare claims annually are lost to fraud, waste, abuse and error massive resources have been devoted to this area. Some causes of these issues are external provider billing issues, other possible payers, issues with group eligibility, etc. Others run throughout a payer's organization configuration problems, data loading challenges, and manual adjudication errors. As a result, this is a complex area, requiring varied and robust efforts. Given the amounts at issue by some estimates 3-10% of all amounts paid on healthcare claims annually are lost to fraud, waste, abuse and error massive resources have been devoted to this area. The good news is that payers to varying degrees have for years been recouping portions of these overpayments through various methods. In fact, the returns from those programs have continued to grow over time. Factors that contribute to increased success in such programs include: Improved selection of possible errors through increasingly sophisticated data analysis; Application of predictive modeling and related techniques that sift through massive amounts of data; Improved automation of various tasks required to review claims for such errors; Improved tools to help manage and track workflow of teams focused in this area; Upgrades to legacy claims systems to address gaps that cause errors or allow these workflows to occur within required statutory timeframes; and Increased availability of experienced personnel as a result of tools that permit and speed remote review of information via internet-based portals. Key Components of Claims Processing Accuracy Of note, a truly robust Payment Integrity program includes both efforts to structure programs and processes to address claims overpayments both before and after a claim is received. Most payers work in both areas, and often, as described below, learnings from work done after claims are received can be used to identify areas for improvement in systems, etc. that will reduce claims overpayments by addressing systemic weaknesses. This paper will focus primarily on the key items and issues that occur once a claim has received by a payer. Discussion of the overall approach to Payment Integrity will be reserved for a later date. There are three primary components that must be considered here 1) selection, 2) research and review, and 3) adjustment. Briefly, the key aspects of each are: 1. Selection This is the process of determining which claims either are overpaid or merit further research or review in an attempt to uncover overpayments. This can take numerous forms: Threshold Review simply flagging for review or research any claim that will pay above a certain threshold. With older claims platforms, this can be very valuable; 2

4 Simple Rules these are based on known common errors in either provider billing or adjudication (system errors, common human errors, etc.). Again, these tend to be more valuable with older legacy claims systems, and amount paid is often a factor; Advanced Rules these typically are created using specialized knowledge of the services at issue, and relate to things like standard treatment patterns, specific codes prone to greater risk of overpayment, and basic benchmarking. In many cases, very few claims systems can capture these situations, because they are more complex, and rely on detailed knowledge and deduction; and Predictive Modeling this is a sophisticated process that involves in-depth analysis of data through robust benchmarking and scoring to determine the relative risk of overpayment on each claim. It is based on complex balancing of various combinations of the above as well as outlier patterns and similar measures. [E]fforts can also uncover systemic issues that are causing repeated errors. Sophisticated plans have ongoing efforts to resolve such issues so that overall errors are reduced. This can be as simple as updating a fee schedule, or as complex as changing a processing workflow to reduce the incidence of human error. 2. Research Claims identified in a selection process will fall primarily into two categories, those that 1) can be resolved (denied/adjusted/etc.) without further investigation, and 2) require additional research, either of plan information, or medical treatment information to confirm billing. The first category can be resolved quickly and often with minimal human intervention. The second, however, is where both, the challenge and opportunity lies. Plan Issues Situations where an error could have occurred because of a problem at the plan include: Misapplication of or Ambiguity in payment policy; Possible excessive payment caused by processor error; Incorrect loading of a fee schedule; Incorrect loading or interpretation of provider contract terms. In addition to identifying an error on the specific claim flagged, such efforts can also uncover systemic issues that are causing repeated errors. Sophisticated plans have ongoing efforts to resolve such issues so that overall errors are reduced. This can be as simple as updating a fee schedule, or as complex as changing a processing workflow to reduce the incidence of human error. Medical Record Review In certain instances, the issue identified requires that external information be gathered and reviewed to determine the appropriate action. This typically involves one of the following: Itemized Bills In situations where services are bundled under a higher level code (such as the Revenue Code methodology for hospital claims), review of the underlying detail can show that items were billed inappropriately (unbundling supplies, billed in the wrong category where there are different payment rates/methodologies) and the result is an overpayment; 3

5 Medical records, including progress notes, infusions charts, lab results, etc. Review can confirm that a different level or quantity of a particular service was performed than billed (infused drugs, supplies, etc.), that the service was not performed at all (patient had an allergic reaction to a drug given as a precursor and so did not receive another drug, even though ordered and scheduled), or some other issue (service was not medically necessary). As with anything, plans typically go through a progression in their Payment Integrity efforts, reflecting things like how much competition there is in their markets, how much financial pressure they feel (based heavily on whether they are for profit or not), and what products predominate in their portfolios. 3. Adjustment Once an appropriate action has been determined, the plan must make an adjustment in its system. For plans with limited system capabilities, this can be a manual process. For others, the process can be accomplished as a batch process, which is regularly scheduled and run with minimal human intervention. Sadly, for many plans, their legacy systems cannot support a batch process, and individual processors must manually adjust every such claim. Typical Progression of Payment Integrity Programs As with anything, plans typically go through a progression in their Payment Integrity efforts, reflecting things like how much competition there is in their markets, how much financial pressure they feel (based heavily on whether they are for profit or not), and what products predominate in their portfolios. At a high level, plans can be broken down into four categories: Basic The least sophisticated plans employ basic post-payment claims editing tools, primarily through their claims processing software. Issues addressed typically are subject to simple analysis, such that the claims can quickly and easily be adjusted before payment is made. Such plans often do not have any resources of note to conduct research or gather and review external information in the claims area, and engage in minimal efforts to correct systemic errors uncovered. Expanding At some point, plans increase their focus on reducing claims payment errors as a result of internal teams noting errors, providers appealing claims, and speaking with peers and determine that it is appropriate to expand their Payment Integrity efforts from the basic work they have been doing. Typically, they first assign some very experienced claims processors that already work at the plan (and therefore have detailed knowledge of the claims system) to review claims post payment selected based on relatively basic methods. Such efforts can also include additional review of certain claims post adjudication but before they are paid, based primarily on payment thresholds. Internal teams devoted to Payment Integrity are small and typically have other functions they perform. In addition, the plan may retain an external vendor with expertise in Payment Integrity to perform analysis on their data to uncover overpayments. Again, efforts to make changes to correct systemic issues are typically quite limited. 4

6 Established Most plans of reasonable size have internal groups devoted to Payment Integrity that face ever increasing recovery goals each year, and employ various combinations of internal and external efforts to address overpayments. Typically, Blues plans have large internal teams, because their geographic concentration allows them to perform efficiently the onsite auditing work involved in some of these programs. Conversely, plans with broader geographic coverage often rely on external vendors to perform at least some of the review and auditing. In addition, some plans perform certain analysis and review pre-payment, having recognized the inefficiency of doing the work after payment has already been made to the provider. Often, however, those efforts are limited by legacy claims systems and technologies that cause certain aspects to be very manual as workarounds are required. At this stage, such plans also often begin to take more seriously efforts to identify and address systemic weaknesses that exist in their systems. As noted, most payers begin their Payment Integrity efforts with claims that have already been paid among other things, it allows adequate time to scrutinize claims properly, and reduces the risk of substantially delayed payment on claims that do not have issues. Industry Leading There are also plans that have taken the need for robust Payment Integrity efforts very seriously, recognizing that in the modern system, anything but cutting edge tools and programs will pose serious challenges in the coming years. These plans are looking for best of breed solutions to the problems posed in the Payment Integrity space, and both have not only upgraded their systems and tools to permit more efficient analysis and review, but also devoted the time and resources to push towards the best results. Such plans understand that they should focus not just on the amount that is recovered post payment, but also what is prevented through pre-payment reviews, and the changes required to address systematic errors and weaknesses. These plans are constantly looking for new options, and understand that innovation in this area is accelerating. As a result, such plans have pursued innovative delivery models, such as co-sourcing, or tiering, to capture additional options. They also are utilizing web-based applications provided by vendors that can perform functions the payer's legacy systems cannot. The Evolution of Pre-payment As noted, most payers begin their Payment Integrity efforts with claims that have already been paid among other things, it allows adequate time to scrutinize claims properly, and reduces the risk of substantially delayed payment on claims that do not have issues. It is widely recognized that such techniques are inefficient. In addition to the resources spent in identifying such overpayments, recoveries are typically limited to cents of every overpaid claim dollar the rest is lost to administration costs, legal fees or other similar pay-and-chase expenses. It similarly leaves a payer exposed to quick hit schemes, where a provider finds a weakness and runs hundreds or thousands of improper claims through a short period of time. Post-payment Programs also can result in provider abrasion, as monies have to be recouped sometimes many months after they are paid, and through repeated communications with the provider or their staff. 5

7 This has led some providers large hospital systems in particular to negotiate limitations on retrospective reviews into their contracts, which make such recovery efforts even more challenging. As sophisticated payers (typically those in the Established category or above) have found it harder and harder to increase results from such retrospective recovery efforts, they have begun to focus more on attempts to address overpayments before they occur. Tools here employ various techniques, including functionality such as profiling providers on billing and treatment patterns, comparison of member utilization, and scoring capabilities to determine the risk that a claim is overpaid. Such tools must perform various tasks significantly faster than tools used in traditional retrospective review scenarios. This is necessary given the volumes of claims processed, state prompt-pay guidelines and the fact that plans' operational capabilities limit their ability to conduct manual review and analysis quickly. As sophisticated payers have found it harder and harder to increase results from such retrospective recovery efforts, they have begun to focus more on attempts to address overpayments before they occur. Although the advantages of such efforts are obvious, they pose more difficult problems than traditional post-payment programs, since speed and accuracy is at a premium. The good news is that technology has increased the ability to implement such programs. Some of the key issues include: Selection Given applicable regulations, it is important that initial screening, including any manual review, be performed exceedingly fast. Most states have legal requirements governing how quickly a plan must process a claim once it is received. Failure to take action (pay, deny, etc.) within the applicable legal timeframe on large numbers of claims will be crippling to a plan, given the significant interest and fines that could be triggered. Since most such efforts occur after traditional adjudication, claims will already have spent some time in the plan's system. They therefore will already have some type of regulatory clock running. Depending on the circumstances, it is possible that most of the allowed time has already run by the time the claim reaches the pre-payment program screening threshold. Thus, as much as possible, selection criteria must be automated. To be successful, the selection must be returned to the plan in less than 24 hours (if for no other reason than that the next batch of claims will be ready for selection at that point). Optimally, given the time to extract, move, receive and import data, as well as somehow hold the claims, an ideal process should ensure selection is accomplished in no more than 4-6 hours. In addition to speed, key focuses are on reducing false positives and achieving high average savings per claim. These will avoid rework and provider disruption, and ensure ROI. Rules that are subject to clear decision are therefore ideal initial candidates. The items that are either very complex to document or simply too unlikely to create a rule to capture will often require an experienced claims auditor to review the specific claims identified. 6

8 In fact, there are now sizable, well trained labor pools in other countries, such as India and the Philippines that could be used (to research possible errors quickly)... In fact, some of these may require manual review in the selection process, to screen out as many false positives as possible. Thus, sophisticated processes will involve some sort of triage procedure it will be impractical to review every claim as part of this process. Any manual review must be facilitated via technology as much as possible. The ability to perform those complex selection checks timely will be a distinguishing factor. This means applications should prioritize items (FIFO, based on $s, risk of error, etc.), display backlogs, and send alerts when efforts are running behind. Research Claims identified as needing research on issues within the plan (e.g., payment policies, contract terms, or claim images) will require a knowledgeable claims auditor. As with the selection phase, any regulatory prompt-pay clock will typically not stop during such research. Thus, speed is also of the essence here. Since such manual work can require some time, this is an area where significant staff may be required. Of note, with the ability to access reference material through the internet as well as remote access (and security to ensure it is protected) to claims systems, the pool of people who can perform this work has expanded. In fact, there are now sizable, well trained labor pools in other countries, such as India and the Philippines that could be used for this purpose. In addition to staff, workflow management will become important here to ensure that claims are released before regulatory deadlines. Medical Record Review Claims where additional information must be obtained from the provider can be another area that poses significant complexity in the prepayment process. First, rules are not uniform by jurisdiction (state, federal, etc.) concerning the process that must be followed (primarily on timeframes for the request, provider response, etc.). It is definitely vital to move quickly to notify the provider that additional information is necessary, since the prompt pay clock will not pause until that notice is provided. Once records are received, they must be processed and reviewed promptly, again to ensure a regulatory timeframe is not violated. Challenges here include making records available promptly to auditors and finding adequate qualified auditors. As scanning technology has improved, records can now be attached as electronic documents to electronic case files. With the advent of webbased portals, auditors can work remotely, including from their homes or offshore locations, which has greatly expanded the possible pool of talented auditors available. Adjustment Of course, once a decision has been made that a claim should pay differently, that change must be made. If this can be automated, it is one of the simpler steps in the process. Where it cannot be, however, this very tedious and manual task, which must be performed very quickly, poses a risk. This is an ideal candidate for off shoring, since it is a task that can be defined and documented in extensive detail, thus ensuring that quality is maintained. 7

9 In addition to being able to overcome the above, there are certain additional key components of a successful pre-payment program. They include at least: Claims Holding Tank It is imperative to have an appropriate place to stop claims in the flow to conduct selection. Once that is complete, claims not selected must be promptly released back into the claims flow. Those selected, however, must be pended or otherwise held to have further actions taken on them (research, review, etc.). Parts of this likely have manual components, so there are resource needs here; Data Whether the work is being performed by an internal team or external vendor, processes to handle data swiftly are key. There are enough other things that could cause the final action on a claim to be beyond the regulatory timeframes data management should not be one of them. Plans stand in varying degrees of readiness to address these challenges. Some have less flexibility given older or less sophisticated systems. With this in mind, it is important to understand that there are several types of pre-payment tools or processes that can be explored. Claims Editing The easiest tools are those that have very clear selection rules, and result in claims flagged that have clear actions to be taken without any human intervention. In this circumstance, either industry or payer specific rules are coded in a manner that they can be applied both to identify claims accurately that run afoul of the rule and to take action to correct the error. Examples here include situations where a claim is submitted with services billed separately when under applicable rules some are included in the payment for others, and reduced payment for multiple or bilateral services. Claims Flagging Tools exist that will identify claims that merit further research. These can be tools that employ rules of various levels of sophistication, but for whatever reason, the rules cannot be written in a manner to determine whether there is an error on the claim without some human intervention. These tools can often rate claims in terms of risk of error. They require more sophisticated auditors to review the claims and determine an appropriate action. At times, this can also require that additional information be gathered and reviewed. Claims Scrubbing There are tools that also can allow knowledgeable personnel to screen through claims quickly to find unusual patterns that merit further analysis. This relies either on various pre-programmed reports that might reveal such patterns, or a very knowledgeable auditor to determine appropriate analysis. Once a pattern is uncovered, it may require further research or that additional information be gathered and reviewed. 8

10 Comprehensive Solutions There are solutions that provide all of the above, including resources to perform the various additional work research, information gathering and review, etc. As with any such solution, there is an attraction to having all key functions managed externally (although some plans also are concerned about handing over too much control). However, it is important to ensure that each component of the solution is well designed and implemented, since with these solutions the payer has the least ability to ensure that claims are processed timely. Plans that want to be industry leaders must have a robust strategy to review claims for errors before they are paid. Conclusion Payment Integrity is a complex area, and can pose real challenges. However, given the modern healthcare landscape, payers must ensure they have robust and effective Payment Integrity Programs that fit together into a broad strategy if they are to remain competitive. Ultimately, to achieve superior results a sophisticated payer should employ a series of programs and tools, and those efforts must be coordinated. At core, the strategy must 1) ensure that information (including contracts, claims, benefits) is in its systems correctly, 2) check the claims most likely to contain issues before payment for possible error, 3) have robust backend efforts that identify errors and feed systemic issues to the front end, and 4) identify new issues or patterns as they are emerging, and adjust systems and processes accordingly. Once a claim has reached a payer's adjudication system, one key focus is how to ensure it is paid correctly. Efforts that focus on claims after they are paid can uncover substantial overpayments. However, they are inefficient; do not address all the issues that can arise. Thus, plans that want to be industry leaders must have a robust strategy to review claims for errors before they are paid. As technology has evolved, more and better tools have become available in this area. Payers should not only work to have solid claims editing engines, but must also have extensive capabilities to use modern data analytics to flag suspect claims, as well as access to auditors with industry leading knowledge. Such a multipronged approach is the current industry best practice in this area. 9

11 SCIO Health Analytics Corp. 220 Farmington Ave, Suite 4 Farmington, CT Phone: Fax: info@sciohealthanalytics.com