(Originally printed in Tips, the journal for The IPA Association of America)
If you have ever been responsible for paying a health care claim, you are acquainted with these questions:
If you have ever submitted an HCFA-1500 form for payment, you may have asked these questions yourself. It would make things a lot simpler if claims were paid just the way they were submitted. Unfortunately, such a practice would lead to numerous duplicate payments, payments for ineligible members, and payments for services that are inappropriately coded, among other reasons. The fact is that health care claims often contain billing and coding problems that must be identified and addressed before payment can be rendered. The process of ensuring that claims are evaluated and paid according to contracts and standards is called claims adjudication.
Generally speaking, there are two types of billing and coding problems: Mistakes and inappropriate coding. A typographic error is a mistake. Ineligible membership is a mistake. On the other hand, unbundling of services is an example of inappropriate coding. Billing for a higher level of service than is clinically documented in the medical record is another example of inappropriate coding. It is possible for inappropriate coding to be the result of a typographic error, assigning the wrong code, or not being aware of a new guideline that calls for a different code. Occasionally, inappropriate coding is a deliberate attempt to increase reimbursement by intentionally manipulating coding procedures – “gaming the system.”
Mistakes are often easily caught by simple claims adjudication systems or in manual review. The process of detecting billing and coding problems is governed by guidelines and algorithms called business rules. Administrative business rules are designed to catch member eligibility problems, dates of service outside of eligibility spans, outdated or mistyped codes, incorrect health plan product lines (HMO, PPO, Medicare, etc.), timely filing restrictions, and other information that may be simply compared to a list. Typically, these rules are easily changed or adjusted to fit the requirements of each contract the IPA holds.
Some mistakes are more difficult to identify, requiring more sophisticated automation or more intensive manual review. For example, accurate detection of duplicate claims requires more than just a simple one-to-one comparison. Duplicate submissions may exist due to office error (“I can’t remember if we submitted this claim.”), attempts to encourage faster payment (“They haven’t paid it yet, so I’ll submit it again.”), or hope that someone will pay (“I’ll submit this to everyone, and one of them will eventually pay it.”)
The Office of the Inspector General (OIG) and the Health Care Financing Administration (HCFA) recognize that a real and growing problem exists with inappropriate coding, especially in the area of level of service for Evaluation and Management (E&M) codes. Inappropriate coding may have a profoundly negative effect on the financial health of an IPA. In addition, inappropriate billing also hurts the entire health care system by distorting actual utilization data, inflating capitation rates, causing restrictive legislation, and eventually increasing the cost of health insurance to patients.
For many years now the claim reviewer’s job has been made more difficult by the complexity of coding many medical occurrences, the large volume of distinct diagnoses and procedure codes, multiple coding authorities, the periodic updating of coding guidelines, disparity in policy among health plans, the ambiguity and difficulty of E&M review, and the added time needed to complete a thorough review. Most automated adjudication systems are unable to perform complex reviews, and the throughput rate of professional claims untouched by human hands is only between 40% and 50%. Payor systems are designed to validate eligibility, member benefits, coverage spans, and a basic level of coding accuracy. Payors’ legacy systems often make it difficult for them to keep up with the continual stream of changes in adjudication rules. Typically, these systems are not designed to report at a level of sophistication providing useful utilization summaries and physician profiles.
Sophisticated computer systems are expensive and take a long time to implement well. Even then, rarely are they capable of identifying many claims that are erroneous for complex reasons. This can result in a significant number of claims being paid in error. Further, because claims payment rules evolve over time, many new rules cannot be implemented easily. Payors often have to wait for software vendors to catch up on the latest edits, or they must make changes to the system at considerable expense.
There is a distinct need for a better flexible and sophisticated adjudication solution: one that performs the required complex operations, one that does not delay payment, one that meets the diverse needs of a specific market, and one that does not burden the IPA’s limited financial and administrative resources.
If you are searching for robust adjudication capability, you should consider the following questions.
What is the difference between “rules” and “logic?” Typically, rules refer to business specific comparisons: patient eligibility, participating physicians, etc. This is a validation operation, either correct or incorrect. Logic refers to an algorithm (or a set of them) that performs a series of complex operations, the type of sophisticated analysis a person might do in manual review.
Why won’t our existing software do the job? If you are processing your own claims or if you are outsourcing that function, your existing adjudication software may not be up to date with current coding standards or may be denying you the flexibility and customization needed to account for the uniqueness of your market, your physicians, or your contracts. Is the software a “black box,” or is it an open library? Adjudication decisions should be rendered with documentation that reflects only your agreed upon medical policy, not a vendor’s opinion.
What will sophisticated logic do? Sophisticated algorithms do more than simply validate data. For example, sufficiently advanced algorithms rely on historical data every time a claim is adjudicated, correcting problems in the billing and making fact-based assumptions in order to more accurately process and pay claims.
How is this logic developed? Can the system’s decisions be defended? Adequate adjudication systems will make use of all coding guidelines in the public domain or those accepted as national standards and maintain this documentation in an accessible format. More advanced systems may offer an expanded set of logic that is based on recommendations from specialty academy guidelines, expert physician panels and historical data. Any system an IPA uses should not only render a decision but should provide a reference for it. A truly superior system will have open source code so that any invoked rule may be traced back to a defensible origin.
Can the logic be adjusted to fit the needs of the providers in one particular IPA? Only the most advanced adjudication systems allow flexibility and customization at this level. A truly superior system will allow control of business rules and logic on a global scale down to provider UPIN. That is, rules and logic may be turned on or turned off to selectively apply medical policy at the individual, group, specialty, or member level.
Will such a system be able to profile an IPA’s providers for comparison to normative standards, coaching or education? Identifying coding patterns and utilization patterns is invaluable to managing IPAs. This level of reporting should be available in sophisticated adjudication systems.
How much time does this add to the payment process? No worthwhile adjudication system should add significant time to the process. Turnaround time should be within 24 hours of receipt.
Will the decisions be consistent over time? One of the primary reasons for using an automated adjudication system is to take advantage of the consistency in decisions. A manual claim reviewer will rarely apply rules consistently from claim to claim over a long span of time.
Can historical data be reviewed? A state-of-the-art adjudication system should review claims both prospectively and retrospectively. It should recognize prior incorrect or over-payments and other types of errors that can be answered only in context of historical claims.
How might this software be beneficial to the IPA’s financial performance? Any IPA that pays its providers on a (modified) fee-for-service basis will gain significant savings. A good automated adjudication system will filter out inappropriate claims so that only valid payment will be rendered. Going forward, the system should also provide information that will allow providers to improve their coding and billing practices.
As the art and science of claims adjudication grows and evolves to accommodate the nation’s health care needs, we may eventually come to a place where adjudication takes place in the provider’s office. Processing will be instantaneous or “real-time” with all transactions taking place over secure, fiber-optic Internet connections. Reports and profiles will be instantly updated and available at any time based on the most current data. These days are not far away; however, until that time, IPAs must search for the best defense against the problem of incorrect and inappropriate billing.
Recognize that legacy systems are inadequate to the growing task of adjudication. Demand adjudication that uses historical information. Require that business rules and logic have defensible documentation and are updated regularly to conform to nationally recognized guidelines and standards. Identify solutions that are flexible and that may be customized to fit the unique requirements of your contracts and your market.
In the healthcare industry, we must strive to keep the patient at the center of our motivations and decisions. Financial accuracy is simply another important responsibility owed to those patients.
Copyright (c) 2001 iHealth Technologies, Inc.