If you are an insurance agent or broker involved at all in any part of the U.S. health insurance market, one thing you need to know is that the basic information technology architecture underlying the claims transactions has weaknesses.
Effective financial management is critical in the health care world, just as it is in every industry. While most industries in the economy have a level of maturity and seamlessness in their basic buy-sell transactions, health care is still playing catch up. Claims transactions are the foundation of our health care delivery system, yet payers and providers continue to struggle with getting their claims systems configured right.
Claims leakage due to configuration inaccuracy and its associated collateral costs coming from appeals, reprocessing, etc. regularly account for between 0.5% and 2% of overall payer and provider margins, sometimes spiking as high as 3%.
Considering the industry is running on thin margins overall and every dollar of leakage increases the strain on our economy as a whole, one can see the value of getting claims configuration right. Indeed, the right approach and solution to fixing claims configuration can be expected to yield four to eight times return on every dollar invested.
Dynamic — and Opaque
There are many variables involved in determining the exact amount paid to a provider for care, and these elements are in a constant state of change. Regular updates to federal and state regulations, constantly changing and complicated fee schedules and pricers, changes to benefits plan design, ongoing renewals and amendments to payer-provider contracts across multiple lines of business, hundreds of payer organizations and hundreds of thousands of provider organizations, multiple claims adjudication systems on the payer side and an even greater number of claims billing systems on the provider side — all make it difficult to achieve configuration accuracy and prevent leakage.
Challenges from these constantly changing variables are further compounded by elements unique to our health care industry:
1. The consumer isn’t the one directly paying for the product/service;
2. There is a lack of transparency, interoperability and standardization across the basic claims processing systems on both the payer and provider side; and
3. There are millions of transactions (claims) being processed every day.
Even as we move away from fee-for-service toward value-based contracts and accountable care organizations, the criticality of accurately configuring the fundamental underlying medical claim is far from diminishing.
A payer had multiple contracts with an ancillary provider that included payments based on a fee schedule that updates each year. Due to changes with many elements of IT support, the payer failed to update the fee schedule when the appointed time came around. This resulted in a million-dollar overpayment for just one single procedure.