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Is This A Valid Claim?

Gary Baldwin, for HealthLeaders Media, December 18, 2007

Last week I reported on consumer mistrust of health organizations, a gap some are trying to bridge with Web portals. That gap may get bigger, if a recent study that crossed my desk has any merit. Now, the analysis may not have the sexiest title: "Automated billing/payment process can reduce U.S. health care costs without sacrificing patient care." Furthermore, it was commissioned by PNC. Considering that PNC is a financial services firm whose product line includes electronic claims processing may give rise to skepticism. Borrowing a simile from my editor, it's like an orange grower commissioning a study on the merits of OJ in the morning.

However, there is one finding in this report that is truly outstanding. After interviewing 150 hospital executives and 50 commercial health plan executives, the researchers at Chadwick Martin Bailey discovered that an extraordinary amount of claims resubmission is taking place. I've heard this plenty of times anecdotally, but do not recall a comprehensive study on the topic. "Respondents reported submitting 5,000 claims per month to insurance companies for payment. Hospital executives reported that, on average, one in five claims they submit is delayed or denied, and that 96 percent of all claims they submit in an average month must be resubmitted at least once. Insurance companies go back to providers twice, on average, to get all the information they need to pay a claim."

Written in the dry language of a white paper, this report is sparing on the exclamation points and adjectives of disbelief. Yet, when I read that virtually all claims are resubmitted at least one time, I know that something is seriously wrong. The problem, asserts PNC, is the absence of electronic data interchange transactions along the food chain that connect providers and payers. Even hospitals that use EDI to submit claims struggle: They average three re-submissions per claim. Hospitals without EDI technology resubmit an average of 11 times! (My exclamation point.)

According to the study, all this administrative inefficiency is costing the industry dearly. The executives on both sides of the aisle estimated that "just over 30 cents of every dollar spent on healthcare in the U.S. currently goes toward administration." The ticking time bomb here is consumers. In a corollary study, PNC asked 1,000 consumers how much administrative overhead would be warranted in our healthcare system. Answer: less than 10 cents on the dollar. "Seven in 10 said they would be 'highly upset' if overhead hit 30 percent." Is that a mob forming outside the hospital?

Ironically, the facilitation of electronic submissions was one of the cornerstones of the original HIPAA legislation. More than a decade ago, in the name of administrative simplification, the legislation called for standardized electronic formats for claims submissions. Apparently we have a long way to go. You may be interested in hearing the thoughts of Lisa Miller, whom I recently interviewed on this topic. Lisa, chief technology officer at Payformance Health, was honored by the Workgroup for Electronic Data Interchange for her analysis of the ROI of HIPAA electronic claims standards. Her cost benefit analysis, done for the National Committee on Vital and Health Statistics, focused on technological conversions related to the HIPAA legislation. "We mandated a standard that had not been tested and we paid a price for that," she told me. "We have not recouped the ROI potential that was there."

The industry jumped full bore into the privacy provisions of HIPAA. It may be time to revisit the basics of electronic claims submissions. That issue may not be as sexy as a stolen computer with identifiable health data. It is a critical business issue nevertheless. If we can't unravel the claims submission tangle, consumers may have one more reason to feel estranged from the healthcare system they rely on. And CEOs will have even more difficulty financing the care we all cherish.


Gary Baldwin is technology editor of HealthLeaders magazine. He can be reached at gbaldwin@healthleadersmedia.com.

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