Dr. Noah Payne shook his head in disbelief: the practice reimbursements shrank instead of climbing in response to the recent hiring of Dr. Inna Ternist. The new doctor clearly added to the total number of patients seen yet overall payments did not reflect the added charges. Perhaps the new claims were not created, submitted, or paid? Dr. Noah remembered noticing the growing pile of rejected and denied claims accumulating dust on his desk - he never had the time to review them...How many of these claims are clean? How many of them require manual review and correction?

Dr. Noah looked at his Vericle screen and began analyzing the numbers. The system showed 58 percent clean claims (PCC). In other words, almost every second claim required manual correction. Who could be causing such a high level of problems: the practice, the billing service, or the payer? Dr. Noah's instinctively felt that perhaps the billing service was negligent about data entry process and kept introducing massive data errors. But the service manager was quick to explain a rigorous quality assurance process for data entry. What else could be causing such a high level of manual work in a seemingly streamlined process?

A quick review shows that PCC varies along several dimensions:

1. 19 and 70 percent for financial class
2. 37 and 66 percent for month of service
3. 55 and 59 percent for physician
4. 29 and 70 percent for various CPT codes

Trying to discover a pattern, Dr. Noah looked for a root cause dimension. He drilled into 99213 - the single largest frequency CPT code for his practice. Vericle showed 3,135 claims and the above average 62 PCC carrying charges and payments for 99213 code.

Having isolated the single most frequent CPT code, Dr. Noah was thinking about other dimensions that influence PCC. He hypothesized that if all doctors in his practice had the same coding skills, and assuming uniform distribution of errors, he should observe no PCC variance across the doctors. Yet, a quick click on a Vericle screen yielded a spread, confirming his suspicion that different doctors maintained slightly different coding skills:

1. Dr. Ted 1,554 claims and PCC = 63%
2. Dr. Lori 865 claims and PCC = 62%
3. Dr. Inna 194 claims and PCC = 61%
4. Dr. Noah 516 claims and PCC = 60%

Next, Dr. Noah switched his attention to distribution of PCC across the financial classes. Again, he hypothesized that if all payers used the same rules to deny claims then there should be no difference in the average PCC for different payers, subject to a uniform distribution of errors over a large sample of submitted and paid claims. Yet the numbers showed a significant (30 percent) variation of PCC for the same CPT code: UHC - 82, Blue Cross Blue Shield - 73, Oxford - 64, Aetna - 59, Medicare - 59, and Cigna - 51, confirming his conclusion that various payers used various rules to deny and underpay claims.

Dr. Noah recalled reading an article about PacifiCare, a Californian insurance company being fined upon an audit. The joint Department of Managed Health Care and Insurance Department recently analyzed 1.1 million paid claims from June 2005 to May 2007 that covered about 190,000 members in PacifiCare's HMO plans and PPO coverage [Gilbert Chan , "PacifiCare fined record $3.5 million," www.sacbee.com , January 30, 2008]. They discovered 30 percent of the HMO claims wrongly denied and 29 percent of the disputes with doctors were handled incorrectly. PacifiCare paid out over $1 million and was fined additional $3.5 million. Dr. Noah's findings roughly matched PacifiCare audit - the insurance companies were failing anywhere between twenty to fifty percent of his claims and each insurance company showed a different failure rate, depending on a system used to fail submitted claims.

Finally, Dr. Noah thought of the billing service operation. Is his billing service systematically working to discover failed claims and improve its response to such discoveries? Is there a pattern of an occasional drop of PCC reflecting its deterioration in response to various payer's initiatives? Conversely, is there any evidence for a systematic improvement effort? A chart of the distribution of a single CPT-code clean claim percentage over the entire year must answer his question. In his mind, PCC should iterate between drops and climbs, hopefully each time at a higher level. Vericle confirmed his expectations, showing an overall improvement of PCC over the year (46% 1-07, 39% 2-07, 52% 3-07, 55% 4-07, 63% 5-07, 67% 6-07, 72% 7-07, 69% 8-07, 72% 9-07, 68% 10-07, 74% 11-07, 73% 12-07)





Article Source: http://EzineArticles.com/?expert=Yuval_Lirov

A Sacramento-area surgeon couldn't schedule surgeries for more than six months because his contract was not loaded in the insurer's computer system. More than 200 of Dr. Watson's patients received letters indicating incorrectly that he was no longer participating in the network. Watson lost about 25 percent of these patients and was not paid for about eight months. Another insured spent eleven months trying to get claims paid for his family, including an autistic child. The insurer never specified what information was needed to make the denied claims eligible for payment.

Are these three isolated incidents or are they three symptoms of a growing problem with the entire provider's reimbursement system? The owners of health care practices easily recognize these painfully familiar symptoms. The better questions are: how are they related to the rising healthcare costs and what can a provider do to help?

In 2005, national healthcare costs rose 6.9 percent - twice the rate of inflation, reaching $2 trillion. National healthcare costs are predicted to double to $4 trillion by 2015. While key health care cost factors include aging US population, the arrival of new and expensive drugs and bio-tech devices, and the defensive medicine, the insurance costs alone stand out as a key contributor to rising healthcare costs. Exorbitant executive compensation became a hallmark of healthcare insurance industry, where William McGuire, CEO of UnitedHealth Group, has reportedly received over $500 million since 1992, more than $1 billion worth of options, a lump sum payout of $6.4 million upon leaving the company, and an annual pension of $5.1 million. But such compensation can be easily justified on Wall Street, when comparing it to outstanding insurance industry profits, such as 38 percent growth in earnings in the 3rd quarter of 2006.

The problem for any successful insurance company is how to make such growth sustainable? This question is difficult because the premium growth (68.4 percent) has disproportionally outpaced both inflation (16.4 percent) and workers earnings (18.2 percent) during the same period (2001-2006), making it impossible to continue to rise the premiums without losing major segments of insured population.

Without the ability to attract new clients or to further raise insurance premiums, cost reduction becomes the next most important approach to enhance profitability. Such cost reduction can be done in a variety of ways, which we conveniently divide into strategic and tactical or opportunistic approaches.

Strategic insurer's arsenal

The creation of an oligopsony through consolidation is the main weapon in the strategic arsenal of insurance companies. Oligopsony exists when providers significantly outnumber buyers, enabling them to dictate prices. Take for example, the PacifiCare's $9.2 billion merger with United Health Group Inc. in late 2005, which created a vast network of HMO and PPO plans covering more than 3 million Californians. Today, three plans alone (UnitedHealthcare, WellPoint and Aetna) cover 77.7 million insured lives. Oligopsony allows the systematic and continuous cost reduction without extra investment, e.g., annual cut of allowed rates (such as the average reimbursement for E&M allowable dropped 10 percent in 2006 and another 6.5 percent in 2007), payment suspension for specific procedures (such as EKG tests for routine physicals), offering "all or none" participation alternatives, or the creation of "tiered networks" that profile providers and incentivize patients to see lower cost providers.

Tactical insurer's weapons

Increasing billing process complexity and inventing new denial reasons through arcane terminology, disparate data formats, and modifications of CPT/ICD codes and medical necessity rules - these are all examples of tactical methods designed to increase providers costs for both billing and follow up and reduce the payments at the expense of practice owners. These methods need continuous investment in personnel training, better process management, and improved technology to keep them effective as the providers begin building more sophisticated systems to scrub and analyze claims and discover payment discrepancies and irregularities.

Provider's Response

Returning to the three incidents mentioned at the outset of this article, the joint Department of Managed Health Care and Insurance Department determined that these are not isolated cases. It analyzed 1.1 million paid claims from June 2005 to May 2007 that covered about 190,000 members in PacifiCare's HMO plans and PPO coverage [Gilbert Chan , "PacifiCare fined record $3.5 million," www.sacbee.com , January 30, 2008] and discovered 30 percent of the HMO claims wrongly denied and 29 percent of the disputes with doctors were handled incorrectly. PacifiCare paid out over $1 million and was fined additional $3.5 million.

In summary, providers need new and effective approaches to mobilize both legal and organizational talent to reverse their revenue decline. Legal methods battle market conditions like oligopsony while large-scale medical billing networks aggregate claim volumes and create resulting economies of scale to enable analytical discovery of under-payments.



Article Source: http://EzineArticles.com/?expert=Yuval_Lirov

A Sacramento-area surgeon couldn't schedule surgeries for more than six months because his contract was not loaded in the insurer's computer system. More than 200 of Dr. Watson's patients received letters indicating incorrectly that he was no longer participating in the network. Watson lost about 25 percent of these patients and was not paid for about eight months. Another insured spent eleven months trying to get claims paid for his family, including an autistic child. The insurer never specified what information was needed to make the denied claims eligible for payment.

Are these three isolated incidents or are they three symptoms of a growing problem with the entire provider's reimbursement system? The owners of health care practices easily recognize these painfully familiar symptoms. The better questions are: how are they related to the rising healthcare costs and what can a provider do to help?

In 2005, national healthcare costs rose 6.9 percent - twice the rate of inflation, reaching $2 trillion. National healthcare costs are predicted to double to $4 trillion by 2015. While key health care cost factors include aging US population, the arrival of new and expensive drugs and bio-tech devices, and the defensive medicine, the insurance costs alone stand out as a key contributor to rising healthcare costs. Exorbitant executive compensation became a hallmark of healthcare insurance industry, where William McGuire, CEO of UnitedHealth Group, has reportedly received over $500 million since 1992, more than $1 billion worth of options, a lump sum payout of $6.4 million upon leaving the company, and an annual pension of $5.1 million. But such compensation can be easily justified on Wall Street, when comparing it to outstanding insurance industry profits, such as 38 percent growth in earnings in the 3rd quarter of 2006.

The problem for any successful insurance company is how to make such growth sustainable? This question is difficult because the premium growth (68.4 percent) has disproportionally outpaced both inflation (16.4 percent) and workers earnings (18.2 percent) during the same period (2001-2006), making it impossible to continue to rise the premiums without losing major segments of insured population.

Without the ability to attract new clients or to further raise insurance premiums, cost reduction becomes the next most important approach to enhance profitability. Such cost reduction can be done in a variety of ways, which we conveniently divide into strategic and tactical or opportunistic approaches.

Strategic insurer's arsenal

The creation of an oligopsony through consolidation is the main weapon in the strategic arsenal of insurance companies. Oligopsony exists when providers significantly outnumber buyers, enabling them to dictate prices. Take for example, the PacifiCare's $9.2 billion merger with United Health Group Inc. in late 2005, which created a vast network of HMO and PPO plans covering more than 3 million Californians. Today, three plans alone (UnitedHealthcare, WellPoint and Aetna) cover 77.7 million insured lives. Oligopsony allows the systematic and continuous cost reduction without extra investment, e.g., annual cut of allowed rates (such as the average reimbursement for E&M allowable dropped 10 percent in 2006 and another 6.5 percent in 2007), payment suspension for specific procedures (such as EKG tests for routine physicals), offering "all or none" participation alternatives, or the creation of "tiered networks" that profile providers and incentivize patients to see lower cost providers.

Tactical insurer's weapons

Increasing billing process complexity and inventing new denial reasons through arcane terminology, disparate data formats, and modifications of CPT/ICD codes and medical necessity rules - these are all examples of tactical methods designed to increase providers costs for both billing and follow up and reduce the payments at the expense of practice owners. These methods need continuous investment in personnel training, better process management, and improved technology to keep them effective as the providers begin building more sophisticated systems to scrub and analyze claims and discover payment discrepancies and irregularities.

Provider's Response

Returning to the three incidents mentioned at the outset of this article, the joint Department of Managed Health Care and Insurance Department determined that these are not isolated cases. It analyzed 1.1 million paid claims from June 2005 to May 2007 that covered about 190,000 members in PacifiCare's HMO plans and PPO coverage [Gilbert Chan , "PacifiCare fined record $3.5 million," www.sacbee.com , January 30, 2008] and discovered 30 percent of the HMO claims wrongly denied and 29 percent of the disputes with doctors were handled incorrectly. PacifiCare paid out over $1 million and was fined additional $3.5 million.

In summary, providers need new and effective approaches to mobilize both legal and organizational talent to reverse their revenue decline. Legal methods battle market conditions like oligopsony while large-scale medical billing networks aggregate claim volumes and create resulting economies of scale to enable analytical discovery of under-payments.

A Sacramento-area surgeon couldn't schedule surgeries for more than six months because his contract was not loaded in the insurer's computer system. More than 200 of Dr. Watson's patients received letters indicating incorrectly that he was no longer participating in the network. Watson lost about 25 percent of these patients and was not paid for about eight months. Another insured spent eleven months trying to get claims paid for his family, including an autistic child. The insurer never specified what information was needed to make the denied claims eligible for payment.

Are these three isolated incidents or are they three symptoms of a growing problem with the entire provider's reimbursement system? The owners of health care practices easily recognize these painfully familiar symptoms. The better questions are: how are they related to the rising healthcare costs and what can a provider do to help?

In 2005, national healthcare costs rose 6.9 percent - twice the rate of inflation, reaching $2 trillion. National healthcare costs are predicted to double to $4 trillion by 2015. While key health care cost factors include aging US population, the arrival of new and expensive drugs and bio-tech devices, and the defensive medicine, the insurance costs alone stand out as a key contributor to rising healthcare costs. Exorbitant executive compensation became a hallmark of healthcare insurance industry, where William McGuire, CEO of UnitedHealth Group, has reportedly received over $500 million since 1992, more than $1 billion worth of options, a lump sum payout of $6.4 million upon leaving the company, and an annual pension of $5.1 million. But such compensation can be easily justified on Wall Street, when comparing it to outstanding insurance industry profits, such as 38 percent growth in earnings in the 3rd quarter of 2006.

The problem for any successful insurance company is how to make such growth sustainable? This question is difficult because the premium growth (68.4 percent) has disproportionally outpaced both inflation (16.4 percent) and workers earnings (18.2 percent) during the same period (2001-2006), making it impossible to continue to rise the premiums without losing major segments of insured population.

Without the ability to attract new clients or to further raise insurance premiums, cost reduction becomes the next most important approach to enhance profitability. Such cost reduction can be done in a variety of ways, which we conveniently divide into strategic and tactical or opportunistic approaches.

Strategic insurer's arsenal

The creation of an oligopsony through consolidation is the main weapon in the strategic arsenal of insurance companies. Oligopsony exists when providers significantly outnumber buyers, enabling them to dictate prices. Take for example, the PacifiCare's $9.2 billion merger with United Health Group Inc. in late 2005, which created a vast network of HMO and PPO plans covering more than 3 million Californians. Today, three plans alone (UnitedHealthcare, WellPoint and Aetna) cover 77.7 million insured lives. Oligopsony allows the systematic and continuous cost reduction without extra investment, e.g., annual cut of allowed rates (such as the average reimbursement for E&M allowable dropped 10 percent in 2006 and another 6.5 percent in 2007), payment suspension for specific procedures (such as EKG tests for routine physicals), offering "all or none" participation alternatives, or the creation of "tiered networks" that profile providers and incentivize patients to see lower cost providers.

Tactical insurer's weapons

Increasing billing process complexity and inventing new denial reasons through arcane terminology, disparate data formats, and modifications of CPT/ICD codes and medical necessity rules - these are all examples of tactical methods designed to increase providers costs for both billing and follow up and reduce the payments at the expense of practice owners. These methods need continuous investment in personnel training, better process management, and improved technology to keep them effective as the providers begin building more sophisticated systems to scrub and analyze claims and discover payment discrepancies and irregularities.

Provider's Response

Returning to the three incidents mentioned at the outset of this article, the joint Department of Managed Health Care and Insurance Department determined that these are not isolated cases. It analyzed 1.1 million paid claims from June 2005 to May 2007 that covered about 190,000 members in PacifiCare's HMO plans and PPO coverage [Gilbert Chan , "PacifiCare fined record $3.5 million," www.sacbee.com , January 30, 2008] and discovered 30 percent of the HMO claims wrongly denied and 29 percent of the disputes with doctors were handled incorrectly. PacifiCare paid out over $1 million and was fined additional $3.5 million.

In summary, providers need new and effective approaches to mobilize both legal and organizational talent to reverse their revenue decline. Legal methods battle market conditions like oligopsony while large-scale medical billing networks aggregate claim volumes and create resulting economies of scale to enable analytical discovery of under-payments.