Proactive Approach to Payment, Error Detection Improves Payment Accuracy for Payers and Providers

Organizations that pay for health care services face intense competitive pressures to control premiums. At the same time, they are focused on ensuring that their members receive the best possible care and that physicians receive fair, timely payments. Juggling these goals while managing costs has become even more difficult during the economic recession.

In the past, payers focused cost control efforts on identifying and recovering overpayments or erroneous payments. However, Dean Farley, vice president of Ingenix Consulting, says a prospective or pre-payment approach to managing payments and controlling costs will facilitate better results throughout the system.

Take, for example, the prospective payment system (PPS) implemented by the Centers for Medicare & Medicaid Services (CMS) in the past decade, which establishes consistent payment amounts for specific health care services. A classification system for each set of services (e.g., diagnosis-related groups for inpatient hospital services) is used to determine reimbursement rates. This means that providers are paid the same amount for treatments related to specific types of conditions, regardless of the actual services rendered.

“Everyone in health care has a vested interest in ensuring that those who need medical care receive it and that those delivering it are paid promptly,” Farley stated. “When providers know in advance what they will be paid for treating specific conditions or patients, they have additional incentives to achieve better outcomes and deliver care as efficiently as possible.”

Commercial Payers Move Toward PPS

The CMS approach has worked so well, commercial payers are applying it to in-patient hospital claims. What they are finding is that accurate coding is foundational to successful PPS implementations. Without code-based reimbursement and standard coding language, claims can be inaccurate, leading to costly claim rework and reimbursement lag time.

“Coding enables plans – in a very rigorous way – to identify which services are being provided, determine where they need to manage their network better, and find aberrations in claims, such as outliers among providers or certain spikes in services over time,” Farley said. “If you don’t code properly, you don’t get paid appropriately.”

Due to the high volume of claims, payers have developed systems that can process massive numbers of claims efficiently and rapidly with a focus on coding accuracy. And although states mandate prompt payment, they do not allow exemptions for legitimate reviews of problematic clams. As such, most health plans have focused their efforts on keeping up with the flow of claims and then making efficiency improvements, rather than investing in payment accuracy strategies or controls.

Commercial payers that implement a PPS system will see only incremental savings initially. However, savings will increase when sufficient data is collected to allow payers to identify and steer members toward those providers who deliver better care at lower rates.

Deploying commercial PPS methodologies allows health plans to share risk with providers, reward providers delivering effective care and control utilization and spending, Farley said, adding that one Ingenix client in Ohio reduced claim edits by 99 percent and decrease payer rejections by 59 percent.

Pre-determined pricing has other advantages as well. PPS can help payers prevent fraud, waste and abuse. “Evolving from a ‘pay and chase’ approach to a ‘prevent and save’ approach allows payers to maximize cost containment and focus more resources on important health care delivery goals,” added Farley. “When you identify claims most at risk for fraud at the front end – before you pay the claims – you are preventing inappropriate payment instead of expending tremendous resources on attempts to recover funds,” he continued.

Prospective strategy garners better outcomes

“When fraud, errors and abuse are identified in a retrospective, post-payment manner, payers often are unable to recover the costs,” said Chris Dorn, vice president, Payment Accuracy, Ingenix. “The trick to investigating problematic claims is the ability to identify the claims that result in the greatest savings to the payer. A consistent, accurate claims review process can help investigators refine their selections, and determine which cases may yield the greatest potential for return.”

When plans attempt to recover costs after the fact, they “generally recover 10 cents to 20 cents on the dollar on overpaid claims. That’s a lot of resources to expend in the hopes of recovering so little,” Dorn said. “Prospective detection efforts yield seven to 10 times the savings.”

Ingenix can help payers take a comprehensive prospective approach to both payment and fraud detection methodologies by offering upfront solutions that will identify potential cases of fraud at the start and foster effective claims management and payment accuracy.

The success of efforts to identify inaccuracies or other problems is largely dependent upon the efficiency and accuracy of the solutions employed. High rates of false positives decrease productivity, because higher levels of human intervention are required to investigate those cases. Meanwhile, payment delays create stress on relationships between payers and providers.

The most effective solutions rely on more than generic statistical analysis to identify fraud. Clinical and investigative domain expertise – combined with analytical skills – is necessary to design health care-specific solutions that will deliver a high return on investment by reducing fraud and overpayment.

“Ingenix employs more than 220 experts, including physicians, nurses, investigators and former law enforcement officials, who proactively help health plans and providers improve coding and payment accuracy,” Dorn said. “They are supported by cutting-edge technology, such as predictive modeling tools that can identify fraud very accurately. The combination of human judgment and innovation puts health plans in a better position to ensure proper reimbursements.”

Dorn emphasized that the goal in supporting health care reform should be ensuring that resources are focused on providing care and improving outcomes. That means, “Paying the right claim, at the right price, to the right provider, without adding inappropriate expense to the process.”

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