Health care payers and providers have struggled over the years, attempting to control the high administrative costs of claims processing. Although these stakeholders are continually working to improve the speed and efficiency with which they handle their part of the process, each has achieved only limited success.

Truly transforming the way claims are processed and significantly reducing costs may require a new approach in which payers and providers recognize each others’ vital role in overcoming obstacles, according to Nick Hilger, senior vice president, Health Systems Development at Ingenix.

“Payers want to ensure that they pay for claims appropriately under their contracts, and providers want to minimize the time and effort they expend in order to get paid in a timely manner,” Hilger said. “If they want to achieve a positive return on investment, they are going to have to understand each other better.”

As a former hospital CEO, Hilger knows that senior leadership is looking for a different paradigm. “The CEO and the CFO want to see efficiency going up and costs going down, and the CIO wants to get rid of the half-dozen or dozen ‘bolt-on’ solutions being used to fix individual problems,” he said. Hilger also noted that providers and payers are equally interested in re-examining claims processing in order to move their businesses forward.

Payer and provider cost concerns

In today’s economy, operational costs are increasing for all business sectors, but in health care, it is the payment system that drives most of the administrative costs that burden the industry.¹ Indeed, the American Medical Association states that “the inefficient and unpredictable system of processing medical claims adds unnecessary cost to the health care system, estimated [at] as much as $210 billion annually, without creating value.”²

“For payers, improving the claims adjudication process is a primary concern since often one health plan runs multiple, disparate edit systems in the daily course of processing claims,” said Jane Goode, director, Ingenix Professional Services. “Also, given the recent spate of health plan mergers and acquisitions, payers are looking to make sense of all of the data that they manage.” This market consolidation has left payers with processes and contracts that involve a high level of customization. The complexity and lack of system flexibility increases the administrative time spent on processing claims.

Providers face similar administrative issues and demands, such as the time and resources required to render claims “clean,” and making sense of the denial reason codes that payers send back to them. Providers want to submit claims that are right the first time, because if they don’t and a claim is denied, Hilger said, this triggers a volley of correspondence between the provider and payer that can significantly delay payment and lead to hours of complex rework by the claims management staff. Payers have an additional stake in preventing these exchanges because they want to maintain positive provider relationships that can be undermined by multiple late payments.

Contracts, overall revenue cycle should be addressed

Although payers and providers may have different goals in the claims process, they must rely on each other for transactions to go smoothly and need to better understand the other’s perspective. Put simply, health systems see every patient as a story told by a series of events and encounters; payers see only the claims, represented as a structured set of data.³

Each entity needs to step back and reexamine how to improve the revenue cycle so it works for all parties, according to Hilger. “The revenue cycle is where health care’s infrastructure is most broken and in dire need of an overall solution. Past experience has shown that trying to fix only one side of the process does not work,” he said. “We need to move forward in new ways and address all of the areas that need repair, regardless of which side of the table they are on during contracting.”

Many of the complex administrative tasks associated with claims processing can be traced back to the contract between the payer and the provider, Hilger suggested. “All parties are focused on the monetary aspects of the contract and not the workflow,” he said. “However, when the contract negatively impacts the workflow, because there aren’t sufficient rule sets, for example, that places a direct monetary drain on the organization.”

Hilger suggests a stronger effort at the negotiating table to identify the downstream implications of contract terms. “The contracting people typically are disconnected from those who actually cut the checks and pay the bills, and so we are left with a Tower of Babel where the people on both sides don’t really understand what was agreed to.”

Cleaner claims, better strategies are the goals

The next steps toward improving the claims process likely will include a mix of better communication, simplified and cleaner claims, ongoing support and technology. In a recent Physiciansnews.com article on reducing administrative costs, the author stated that “the solution to most of the administrative complexity appears to be the use of increasingly sophisticated health information technology.”⁴

Ingenix offers advanced health information technology to help payers and providers optimize their revenue cycle management systems and improve payment accuracy. However, the company’s experts believe that products alone are not a complete solution. Ingenix Professional Services was established to offer not only technology tailored to payer and provider needs, but also a wide range of advisory and technical services that align product benefits with business goals.

“Ingenix Professional Services helps payers and providers devise comprehensive claims processing solutions that incorporate training and support during the planning and implementation phases and beyond,” said Tracey Orwig, director, Ingenix Professional Services. “We put the right products in place, train staff, and identify where additional strategies and support are needed,” she noted.

For example, many physician practice groups use Ingenix ClaimsManager™ to maximize revenue potential. Although the product itself reduces claim denial rates, shortens accounts receivable cycles and increases collection rates, Ingenix Professional Services staff can help providers maximize the product’s performance by assessing its use, analyzing specific payer rules, coding relationships and rules configurations, and determining database clean-up needs.

“We are focused on taking best practice solutions, customizing and interfacing them with practice management systems in an optimized way,” Orwig said. “For example, when we started working on improving one customer’s system edits and workflow, after only two days, we identified an edit fix that eliminated the administrative workload of a team of 12 people.”

For payers, Ingenix offers the Ingenix Claims Edit System® (iCES®) which automatically reviews and edits claims submitted by physicians and facilities, streamlining process workflows, reducing reimbursement errors and improving payment integrity. The Professional Services team works with payers to achieve even better results by pinpointing specific areas for system and process improvement.

“We are the experts on our products and services and we work hard to understand the customer’s unique situation and business goals,” said Goode. “We help clients partner with payer or provider counterparts to optimize their systems and accomplish tasks more efficiently.” She added, “Both parties need to look at process transformation as a priority. Ingenix can help bring together multiple points of view to improve workflow and reduce administrative costs.”

Having relationships with both payers and providers puts Ingenix in an ideal position to help drive change for claims processing and further administrative cost savings, according to Hilger. “The payer and provider DNA is a part of Ingenix. Many of us have worked for these organizations and we know their pain points first-hand. We understand the friction that exists in this space and have the broad perspective and ‘middleware’ to help alleviate it.”

¹ Guadagnino, Christopher, Ph.D., “Reducing administrative costs,” Physician’s News Digest, Physiciansnews.com/cover/708.html (July 2008), states that by some national estimates, the health care payment system accounts for “the bulk of the 25 to 30 percent that the health care system spends on administration.”
² “AMA launches campaign to cut waste from chaotic insurance claims process, unveils new health insurer report card,” AMA press release (June 16, 2008).
³ Hilger, Nick; “Failure to Communicate,” Health Executive (September 2008).
⁴Guadagnino, Christopher, Ph.D., “Reducing administrative costs,” Physician’s News Digest, Physiciansnews.com/cover/708.html (July 2008).

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