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By DAVID JACKSON, director of marketing at Bloodhound Technologies

Healthcare is currently the hottest topic on the national agenda and with good reason. The United States spends some 15 percent of its gross domestic product on healthcare according to some estimates, and millions are still left uninsured. Discussion and debate is thus focused on how to extend coverage on the one hand and how to contain costs on the other hand.

While fraud is certainly an apt target for containing costs, there is another equally galling area to target: administrative or process waste in the claims adjudication cycle. Process waste, for our definition, is inefficiencies in the claims adjudication cycle. Low auto-adjudication rates, pended claims, rejected claims, appeals and delayed payments all contribute to and are examples of process waste. It affects both payers and providers and acts as a silent tax on virtually all healthcare transactions.

What causes waste in the adjudication cycle? There are many small causes to be sure, but most can be traced back to a lack of standardization in payment processes and rules and a lack of transparency throughout the cycle.

Payers have different requirements around current procedural terminology (CPT) code usage, different standards around claim acknowledgements, and various payment rules and regulations.

THE EDIT EXAMPLE

As a lens with which to view the need for standardization, take the discrepancies around clinical editing for example. Healthcare claims are coded to indicate which procedures were performed, which in turn drives reimbursement. Clinical editing evaluates claims to make sure they are coded correctly. Coding rules are called edits, and there are millions of them reflecting the complexity of care and treatment. Edits can come from national standards organizations like the American Medical Association (AMA) and the Centers for Medicare and Medicaid (CMS), or they can be the proprietary rules of a payer or editing vendor.

While there is some degree of standardization--with the adoption by many payers of the Correct Coding Initiative (CCI) edits published by CMS--those edits are not applicable across all members nor are they close to being uniformly applied. In fact, many payers apply edits differently across their providers, lines of business or regions.

The benefits for applying edit rules differently are completely outweighed by the benefits to payers and providers that standardization would bring. For payers, the lack of standardization manifests itself in a myriad of miscoded, pended and rejected claims, as well as an increase in customer service calls from providers.

For providers, the lack of standardization in claims editing dramatically increases the complexity of coding compliance. Keeping track of the variation in coding policies among the many payers a provider might submit to is very taxing for the coders in provider offices. This lack of standardization is a big contributor to the high costs that physician offices spend on administration.

Adopting standard clinical editing rules would greatly reduce administration and maintenance for payers while likely increasing auto-adjudication rates. Providers would see a great simplification of coding tasks and office work allowing them to focus more time and resources on administering care.

THE OPACITY PROBLEM

Adding to the administrative headache caused by the lack of standards, the opacity of the current system further burdens both payers and providers. To continue with the use of clinical editing as an example, the lack of transparency in editing manifests itself in needless appeals and customer service calls from providers confused by coding rules that are not easily accessible or visible, either because the edits are not published or because they are proprietary to the editing vendor.

Although the use of proprietary edits has waned with most payers, we are still a ways away from true transparency between payers and providers.

Using sourced edits is a start, but edit information needs to be available and accessible for all participants in the claims cycle. Many appeals occur when a provider is unaware of the rationale for why a claim is not paid. Making edit sources open and available to providers through a Web site or portal can go a long way to reducing appeals. This reduces process waste for both provider and payer staff and goes a long way to increasing trust, which makes for better provider relations as well.

While it might not be as obvious or as insidious as fraud and abuse, the costs associated with process waste could total as much as $200 billion dollars. The solutions are relatively painless and do not require billions in investment.

Just as fraud has no constituency, administrative waste should not either. Investment in technologies that efficiently deploy standards-based processes and facilitate transparency should be the cornerstone of healthcare IT investments. The success of electronic data interchange (EDI) has proved a valuable tool in driving efficiencies in the claims cycle.

Building on this success by implementing standards for some of the administrative functions in the adjudication cycle, such as claims editing, can dramatically cut cost and inefficiencies for both the payers and the providers.

October 15, 2009

Copyright 2009© LRP Publications