Qualify for a free subscription to HealthLeaders magazine.
Despite federal laws to facilitate transactions, reimbursement claims processing remains mired in a complex tangle.
Part 1: Exploring the Complexity
Editor’s note: This is the first in a two-part series examining claims processing.
When David T. Boucher left his job as a hospital administrator to work in the health insurance industry, he vowed to tackle an issue that has long vexed healthcare: reimbursement claims. That was in 1999, when Boucher joined BlueCross BlueShield of South Carolina. “I was forever frustrated by the black hole of claims,” recalls Boucher, vice president of healthcare services at the Columbia-based health plan, whose commercial business processes 24 million claims annually for nearly 1.5 million members. “I have been on the stump trying ever since.”
Boucher has plenty of company in the industry. The food chain of healthcare reimbursement can only be described, at best, as complex. At worst, the process is all but impenetrable--sometimes even to the executives who oversee it. The federal government’s Health Insurance Portability and Accountability Act of 1996 attempted to untangle the mess by mandating common standards for electronic claims. Experts contend that although the law has helped, much work remains to be done--both in moving away from paper claims and streamlining the processes for electronic ones. The extraordinary effort required to process claims from the point of service to final payment only adds to the industry’s administrative overhead, to say nothing of frustrated patients who can be easily sucked into a vortex when a claim goes awry. “The claims process has lots of problems and no single obvious way to fix it,” says Ray Kobs, executive director of Data Method, a Boston software firm that audits claims metrics and analyzes business processes at some of the industry’s largest health plans, including Kaiser Permanente and Cigna.
Experts like Kobs agree that claims processing is deeply flawed. Exactly how flawed, however, is unclear, as a lack of industry data hampers any analysis. One recent study by PNC, a Pittsburgh-based financial services firm that provides electronic claims processing and reimbursement services, found widespread inefficiency. According to the survey of 150 hospital and 50 health plan executives, commercial claims are like a Ping-Pong ball bouncing between service providers and payers (the survey excluded government payers). “It is rare for a claim to be submitted entirely correctly the first time,” asserts Paula Fryland, PNC executive vice president. According to PNC’s study, 96 percent of all claims submitted by hospitals must be resubmitted at least once. Likewise, health plans go back to providers, on average, twice to get all the information they need to pay. Electronic claims get through the hoops faster, typically requiring three resubmissions per claim, while paper claims are resubmitted 11 times.
All the reworking adds to the administrative overhead, which accounts for 30 percent of healthcare costs, according to the survey. “A hospital is like a busy restaurant,” says Fryland. “Only the price of a hamburger is different for virtually every customer. The waiter must get in the order, deliver a tasty hamburger, and figure out what to charge. It’s a challenge to get all the information in the right format for each payer.”
- Why Is Healthcare Price Transparency So Hard?
- EHR Spending Continues, But Jury Still Out on ROI
- 5 Hot Healthcare Ideas from SXSW
- Adverse Events from Insulin Prescribing 'An Epidemic'
- Care Coordination a Cost-Cutting Quality Driver
- Use of Locum Tenens Up 22% in One Year
- Hospital Groups Strike Back at Hospital Rating Systems
- Payers Detail Strategies That Drive Consumer Satisfaction
- Hospital CEO Turnover Hits Record High
- 4 Marketing Tactics for Hospitals on Instagram