Reinventing Claims Payment for a Value-Based World

The U.S. health care industry’s claims payment system is frustrating to providers, payers, and patients alike. Inefficiency and a system-wide tendency for error wastes precious resources, worsens miscommunication and mistrust among all stakeholders, and inhibits the ability to transition to value-based models. We need to rethink our industry’s disjointed and siloed approach in order to solve a very integrated problem.

Despite billions invested in achieving efficient claims payment, more than 7 percent of claims are not paid correctly the first time, the second time, and sometimes even the third time. The remediation process costs health plans more than $43 billion annually. An entire sector of the industry has evolved to examine claims retrospectively, identify inaccurate payments, and reconcile over- and under-payments. This broad “pay and chase” approach increases administrative costs for the entire industry.

Not only does this waste time and money, but it also impedes providers’ ability to manage their revenue cycle effectively, erodes their confidence in payers, and creates a barrier to closer strategic alignment. Consumers, like providers, expect claims to be paid accurately and quickly, and the system to be focused on delivering good health care – not rectifying payments.

Ironically, the push for automation is compounding the problem. As payers work to improve their claims payment systems by automating processes, they periodically identify gaps where manual steps are still required. To bridge these gaps and lift performance, they invest in more automation. Efficiency and costs improve in those targeted areas, but inaccurate payments continue as errors cascade through the system. This drives more frustration, more manual remediation, and more investment in automation as payers chase problems wherever they show up.

To break this cycle, payers must stop thinking about automation in a siloed way and start linking disparate payment systems. The drive for accurate adjudication can optimize processes, reduce costs, align systems and stakeholders, and help bring accurate payment for value-based payment models to scale.

The Shift to Value Complicates Claims Payment Accuracy

Before the introduction of value-based care, claims adjudication was relatively straightforward. Alternative payment models have greatly increased the complexity of payer-provider contracts and member relationships. Instead of one fee schedule applied to every provider, contracts can contain myriad nuances tailored to specific providers.

Payment automation processes have not kept pace with the plurality of payment models, contractual agreements, and provider networks. As a result, administrative staff must often step in to manually interpret and translate contract terms and conditions, and connect them directly to payment and medical policies.

Manual interventions introduce errors and increase costs. They also reduce the likelihood of timely, predictable, accurate claim payments that adhere to contracts. Those errors are not only detrimental to the workflow of payers and providers. They can make life miserable for patients, too, when deductibles or co-pays are charged incorrectly.  

Open vs. Closed: The Transparency Problem

Myriad systems are used to pay claims. And in larger health plans, multiple claim, provider, and contracting systems are used to pay claims; and apply benefits, medical, and payment policies needed to remit accurately. This multiplicity of data and data sources fosters differences in interpretation and differences in payment.

Accurate and robust claims payment solutions are predicated on rich provider data and transparency into the system’s underlying rules and logic. When providers can view their own data, they can help ensure it is accurate and up-to-date. When they understand how a specific claim connects to the rules and conditions of their contract, and payer and regulatory policies, they can help ensure those claims are paid correctly.

Optimize the Workflow to Automate with Accuracy

Many payers have achieved auto-adjudication rates as high as 80 percent. But auto-adjudication and accurate auto-adjudication are two different things. In many cases — and especially as payers attempt to scale VBR models — rampant errors cause costs to skyrocket, diminishing efficiency gains, and eroding provider confidence and member satisfaction.

For accurate adjudication, rich provider information must always be up-to-date and accessible, and payers must codify the terms and conditions in the contract on the front end. Most important, all health care technology solutions along the continuum, from contracting to payment, must be interconnected and interoperable, ideally using a contemporary service-oriented approach.

When provider data is current and complete, and claims are filtered and assigned accurately up front, the potential for errors is reduced as cleaner (ideally, clean) claims make their way through the system. When once-siloed systems are interoperable, there is less need for manual processing; the same rich provider data is available in each system; and corrections, improvements and updates cascade autonomously across the continuum in near real-time.

The result: Once disparate systems communicate and work together and the payer system is transformed from automated payment to accurate automated payment.

Accuracy Adds Value to VBR

Accurate auto-adjudication reduces costs and frustration, and leads to greater alignment between payers, providers, and patients. Bringing VBR programs to scale with real-time claims payment will require new levels of intelligent automation, interoperability, monitoring, and alerting.

If a payer is having trouble administering a simple fee-for-service contract correctly, it is unlikely to be capable of managing a complex bundled arrangement. Providers will be reluctant to participate or will find the benefits of participation outweighed by the frustration and costs inherent in dealing with inaccurate and delayed payments.

In an interoperable claims payment workflow, transparency is baked in because the same provider data is shared at all points on the reimbursement continuum; contract terms and conditions centralized and are automated up front; and adjudication is efficient, timely less costly … and accurate. This makes it possible for payers to engage with many different providers according to different terms and conditions. In effect, it allows a payer to bring value-based payment to scale.

Ultimately, accurate auto-adjudication frees payers, providers, and patients to focus on what really matters: improving patient health by delivering the best care at the lowest cost.



Amy Larsson is vice president of clinical claims management at Change Healthcare.

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