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The Case for Pre-Pay Claim Auditing for Payment Integrity and Revenue Optimization
Challenge
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* OVERVIEW
Claims overpayment audits and recovery processes are common to managed healthcare organizations. This process, nearly always conducted on a retrospective basis, seeks to identify over/under payments on claims followed by an effective course of collection on overpayments and resolution of underpayments.
Retrospective audits can actually undermine a plan’s standing in the marketplace, as they unnecessarily highlight payment errors, create additional work for all stakeholders and cause angst across the provider community resulting from a payer’s recovery efforts.
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Solution
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A more logical, economical and reasonable approach is to review claims for payment integrity prior to actual payment.
Detractors may argue that the interruption of current operational processes and prompt pay statutory requirements preclude such an approach.
However, there are compelling counter arguments which can establish the business case (and required organizational support) to make pre-payment claims audits a reality.
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Benefits
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Pre-payment claim audits for payment integrity ensure that an entity’s “dirty laundry” remains internal to the organization. Inevitable errors can be identified and corrected before external stakeholders know they existed.
To the extent that overpayments are identified and corrected prior to final payment, they in fact are never overpayments at all. These dollars remain in the possession of the payer as they are never disbursed. Put another way, pre-pay recoveries measure in at 100%; post-pay are 70% at best.
Corrective action prior to final payment avoids the time and cost of recovery efforts, which can represent a substantial percentage of cost of the retrospective audit process. The cost of retrospective recovery efforts must be measured both in terms of dollars spent and relationships compromised. As these costs are avoidable, why would a reasonable executive assume them?
Finally, lower costs combined with a higher rate of “recoveries” in the pre-pay process equates to a higher ROI.
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Payment Integrity Mechanisms
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For years health plans have conducted internal and/or external audits on paid claims in an effort to identify and recoup overpayments. The mechanisms used in this process have typically been dominated by the practice of data mining, whereby queries are designed, written and executed on claims data warehouses to identify claims meeting specific criteria and nuances. Typically, the genesis of a query resides in a known issue or, at a minimum, a suspicion of a payment irregularity. These issues may be unique to a particular facility and/or contract. As a result, the volume of data mining queries is often in the thousands which require considerable management resources. Data mining plays an integral, valuable role in the payment integrity (claim auditing) process and can (and should) be augmented with “contract compliance” audits for potentially substantial additional benefit.
Utilized to a lesser degree but by no means any less valuable is what may be termed “contract compliance” audits. Such audits seek to answer the question of whether or not each claim was paid in strict accordance with the payment terms stipulated in the contract governing each claim. The contract compliance process can also identify certain circumstances typically detected in data mining (e.g. duplicate payments, inappropriate pre-admission testing payments).
Contract compliance efforts differ from data mining operations in that the former incorporates the repricing of each claim, which in turn requires that the relevant provider contracts are loaded to the system in order to accommodate the repricing process. While it may be justifiably argued that the contract load process adds cost to the payment integrity process, this cost is offset many times over through the identification of overpaid amounts which pure data mining may not detect. Consider a scenario in loading an agreement with a two year term and let’s assume it takes three hours to load and QA the load. Your investment of the cost of three hours yields two years of an uninterrupted and continuous payment integrity process, resulting in what would be considered an enviable ROI.
This white paper will briefly explore the benefits of pre-pay contract compliance audits, wherein the audit is performed after primary pricing but before execution of the payment.
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Pre-Pay Contract Compliance for Payment Integrity
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Most, if not nearly all, payment integrity processes are performed on a retroactive basis…anywhere from several days to several months after claims have been paid. This approach unnecessarily compromises the effectiveness of the process in terms of revenue, cost (real and opportunity), ROI and provider relations. But, if post-pay claim auditing makes sense to you, then pre-pay is a no-brainer. Pre-pay offers the significant benefit of 100% recovery of otherwise overpaid dollars with no recovery effort and associated costs. That alone presents a commanding business case for the adoption of pre-pay auditing.
A robust contract compliance solution allows for an automated comparison of the “allowable” on the paid claim to the “allowable” of the repriced claim. The solution requires a robust reporting tool to present suspect claims for validation. Additionally, the solution must aggregate all salient billing and payment data (provider and health plan data respectively). The reporting tool must allow users to stipulate the search criteria for suspect claims. The data aggregation capability must incorporate all information which might be required for the efficient validation of each suspected claim.
Contract compliance audits address known issues, but also detect unknown issues. This presents a significant opportunity which, by definition, data mining cannot accomplish. The beauty of a robust contract compliance solution is that it very efficiently separates the chaff from the wheat…directing analyst’s attention where it is most needed…to the small percentage of claims which are problematic and which hold promise of financial reward.
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The Process for Opportunity
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Assuming the technical requirements are met, pre-pay contract compliance is largely about process.
Start small and define your target population: Resistance and Contract Complexity
Depending on the size of your organization and claims volume, it may not be feasible to audit 100% of claims. In such situations it may be prudent to ask yourself “what facilities create the greatest resistance to my current recovery efforts?” and/or “which facility contracts are the most complex and create the highest volume of payment errors?”. Target these facilities in your initial pre-pay audit process. Over time you can expand at a prudent pace to include greater numbers of contracts.
Seamless Integration and Accountability:
Whatever tool you select for the pre-pay audit process, it must be seamlessly integrated with the existing claims system for comprehensive and reliable bi-directional data exchange. It is essential that 100% of claims routed to the tool are accounted for, so a robust workflow processing capability (including security leveling) is of the utmost importance. Routing should accommodate user defined queues for automated delivery of certain claims to certain analysts, high priority escalation queue for claims meeting user defined criteria (prompt payment requirements, out-of-network, etc.), return queue for claims identified as “paid correctly” or not meeting the user defined level of materiality for error, etc.
Validation Support
As time is of the essence, an efficient operation for the validation of suspect claims is paramount. As addressed earlier, unfettered access to the original detailed billing data (UB-04); detailed payment data (including adjustments); original agreements, amendments and addenda (all linked to claims) are requirements of the highest priority. These must be available to analysts as a built-in function of the pre-pay audit tool. There is no time in a pre-pay payment integrity process to wander off to access hard copy agreements in a filing cabinet.
Additionally, it is helpful to have available a “payment trail” of exactly how the repricer calculated payment on any claim. This allows analysts to get a “jump start” on the validation process.
The “95% Flow Through”
On average only about 5% of claims will meet criteria requiring an analyst’s intervention. The vast majority of claims will flow through the pre-pay repricing and automated payment integrity validation untouched by human hands and immediately returned to the primary claims system for payment.
It is recommended that a code is assigned to these claims and populated to the primary claims system to indicate that the claim was subjected to the payment integrity audit and found (at a minimum) to either have been
a. paid correctly or
b. the payment error is immaterial
For the 5% of claims which are problematic, the assignment of user defined error codes allows for root cause analysis, which itself establishes the foundation for remedial corrections to the primary system repricer.
Administrative Dashboard
An administrative dashboard allows managers to assess user defined metrics instantaneously. Metrics might include analyst’s production numbers (# claims, overpayments validated); queue volumes, inventory, payment accuracy, error code distribution, scoring, etc. Aggregate and drill down capability is helpful.
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The Business Case –
Financial Incentives
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The pre-pay audit has numerous advantages over post-pay from the financial perspective.
Essentially, pre-pay and post-pay audits require the same level of identification resources. However, as the process “captures” overpayments prior to actual payment, there is no need to notify the facility of an identified overpayment and conduct the sometimes messy process of recovery. As recovery expenses can account for up to 20% of actual collections, this represents a significant cost savings.
Overpayment recovery in pre-pay audits is instantaneous, coinciding with the adjustment to the claim. Post-pay recoveries can take as long as twenty-four months.
Overpayment recovery in pre-pay audits is 100% of the identified amounts. Post-pay recoveries generally fall in the 55% - 70% range. The difference can equate to millions of dollars annually.
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The Business Case –
Operational Incentives
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Under the pre-pay process, claims are paid at a much higher rate of accuracy the first time, saving all stakeholders considerable time, frustration and expense. Post-pay efforts actually highlight payment errors.
As a result of greater accuracy in payments and the absence of retroactive “take backs”, providers gain a higher level of confidence in your health plan's ability to pay accurately, creating a favorable provider relationship (another potentially unique selling point).
Post-pay can have the effect of negatively impacting provider relations, whereas pre-pay may actually improve these relationships.
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Summary
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Both pre and post-pay contract compliance audits and data mining play a productive role in the payment integrity process.
It may not be possible in some enterprises to identify all overpayments prior to final payment and therefore a post-pay application is likely to remain in the arsenal of the efficient health plan.
The financial and operational benefits of a competent and resourceful pre-pay audit process are considerable.
The potential realization of these benefits warrants close examination by a health plan seeking to establish or maintain market leadership.
The technology exists to make pre-pay work for your organization.
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About Chart-Tech
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Since 1981 Chart-Tech has provided cost containment and revenue enhancement solutions to healthcare. Hundreds of clients across the U.S. have benefited from the expertise and technology the company provides.
www.chart-tech.com
847-864-1432
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