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In the complex and tedious world that is health care billing, those who pay the bulk of the bills--insurance carriers and health plans--have always had their hands full managing bill payment to physicians practices and hospitals of all sizes and types.

But with the latest trend--consumer-driven health care--taking center stage in recent years, managing bill payment is growing more, not less, complex--even as simplifying bill payment continues within the industry.

Health savings accounts, for example, can be used by workers to pay for routine medical expenses, which count toward the deductible of accompanying catastrophic health insurance. Ultimately, consumer-driven plans shift more of the responsibility for health-spending choices onto the patient.

The challenge is that when you create a new way for providers to be paid, as you do with consumer-driven health care, you create more complexity. Some carriers/payors are turning to technology to ease the pain that comes with managing bills in a consumer-driven world.

PreferredOne, a regional health benefits management company serving 550,000 members in Minnesota, needed to meet that growing demand from employers forconsumer-driven health products--and solve the technology challenges that go with it. A relatively new entrant in Minnesota's payor market traditionally dominated by several well-established organizations ranging in size from 700,000 to 1.5 million members, PreferredOne needed an edge.

In January 2003, PreferredOne introduced Consumer Advantage, a defined-contribution plan that combines a high-deductible medical plan with both a health reimbursement arrangement and flexible spending account. Quickly, Consumer Advantage became PreFerredOne's fastest growing health plan product, but the product posed an administrative challenge.

With one system housing medical claims data and a second system storing health reimbursement arrangement or health savings account records, each claim had to be processed at least twice, causing bill payment issues. Labor-intensive and error-prone, the process threatened to offset the product's inherent cost benefits. PreferredOne quickly developed a strategy to improve product administration, using software technology from TriZetto Group, a Newport Beach, Calif., technology provider for health plans and carriers.

Using TriZetto's Facets Extended Enterprise application suite, all of PreferredOne's critical data--claims, HRAs, FSAs and more--are held in one central data repository. The claims are processed in one step, quickly and accurately, says John Hofflander, PreferredOne senior vice president and CIO. With both traditionaland consumer-driven plan claims now on a single administrative system, PreferredOne has eliminated the expense and risks of integrating disparate software.

"The key to efficient bill management is having the data in one version and in one place," says Hofflander.

Hofflander explains that the new system also automatically updates information related to health reimbursement arrangement or flexible savings account balances, deductibles, and copayments.

"One of the biggest challenges of administering health reimbursement arrangements and flexible savings accounts is that schedules and criteria for rolling over unused balances vary tremendously by employer," he says. "The upgraded system handles this entire process automatically across all employer groups, eliminating hours of work for PreferredOne employees."

Consumer-directed plans may provide health plans and carriers with tremendous opportunities, but, as was the case with PreferredOne, it also may involve some real IT challenges, mainly the strain of increasingly complex administration.

Kim LaFontana, director of Collector Services and Payor Relations at Athenahealth, a Waltham, Mass., technology provider that tries to smooth electronic billing and collections between doctors' offices and insurers and health plans, says that the consumer-driven health care movement is indeed making things more complex for both payors and providers. Mainly, the carriers need to know when the consumer or employee has met the deductible, which is the point when the insurance carrier or health care plan needs to make payments to doctors or hospitals.

"Insurers need to know and track it, so they know when it kicks in," says LaFontana.

To help small medical groups, those with five to 10physicians, ensure payment, Ahenahealth provides an application services provider delivery model, which means all the doctors need is a high-speed Internet connection and a browser.

For carriers and health plans, the key bill management benefit, says LaFontana, is "much cleaner claims," which take the confusion out of the bill payment process.

"Most small medical practices still have personal computers and all the problems that come with them for bill management," she says. "We offer Web-based practice management services, but we have a fully integrated process."

Again, the carriers and health plans benefit because the technology creates more data to create cleaner claims, eliminating messy processes and lost dollars.

"Everyone gets a benefit, whether that means cleaner claims, fewer calls from providers, and lower costs," LaFontana says, adding that Athenahealth, which aggregates the small medical practices into one seamless universe for payors, is striking partnerships with payors in helping them deal with smaller practices.

"A practice with 10 physicians is hard for payors to influence," she says. "Sometimes, it's hard for payors to understand what are the problems for those providers, but we can get them that feedback."

In fact, Athenahealth's Web technology provides several results for payors, including increased auto-adjudication rates (without human intervention) approaching 90 percent and lower phone call-to-claim ratios. "That is priceless in some cases," says LaFontana, adding that in a case study with a large payor, more than 70 percent of administrative costs were saved by using Athenahealth technology.

According to John Sarich, insurance industry marketing manager at Filenet, a Costa Mesa, Calif., company that helps companies manage their digital information, another key bill management for payors is claims "leakage."

With upcoming Health Insurance Portability and Accountability Act requirements waiting in the wings (automated claim attachments will be mandatory), things will only get worse, Sarich says.

"The biggest issue is poorly executed bill management that causes claims leakage, mainly paying the same bill twice, or not paying on time and paying additional charges," Sarich explains. "There are a lot of things that can go wrong in poorly executed bill management."

Sarich says a sizable percentage of claims-related medical bills wind up in "exception processing," which means the payor has to figure out who gets paid for what, rather than a smooth claims payment process.

"You have to take it from the fast track to a snail's pace," Sarich says. "You have to print this out, the send it to someone, and soon you have a problem." Where HIPAA comes in, he adds, is that in the pursuit of eliminating administrative costs in the health claims payment process, the 2005 HIPAA requirement is that claims attachments require an upgrade in technology. That upgrade, which most payors do not currently have in their systems, means, in essence, that if a payor gets a bill from a emergency room, and the diagnosis is a fractured arm, the system should know that the payor will get a bill from a radiologist.

"The metadata should tell my system what else is coming," says Sarich. "And most medical payors are not there yet in terms of technology."

To combat that technology deficit, Filenet offers functionality that can take the first notice of loss and code in, at the outset, the attributes of a claim--so the attachments won't come as a surprise to the payor.

Sarich, who notes that Filenet works with the major health carriers, says claims "leakage" varies by company and the type of claim. But as a rule, Filenet sees it as high as 10 percent to 20 percent of the total claims payout. "That's a lot of money, but most companies deny they have any," he says.

TOM STARNER, a Philadelphia-based writer, is a frequent contributor to Risk & Insurance® on technology issues.

March 1, 2005

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