Greater Claims Data Scrutiny Could Save Hospitals $800M

For the past three years Blue Shield of California and hospitals that are part of the Hospital Association of Southern California (HASC) have taken an extraordinary step to resolve claims denial issues—they've shared information!

That might seem like a no-brainer. But the rule has been (and still is in most circles) that health plans don‘t share very much information about claims processing with hospitals. For years the two suffered more or less in silence as unresolved claims ping ponged between hospitals and Blue Shield.

Eventually the two sides began talking about their mutual frustration with the inefficiencies in the claims process. From those discussions Blue Shield developed its Partnership in Operational Excellence and Transparency program. POET is a web-based analytics portal that consolidates claims data on password-protected dashboard to provide 36 months of claims data, including cycle time, submission details, denial percentages, and appeals information to 175 participating hospitals.

The payer-provider combo has reduced claims denials from 22.8% to 17.4%, cut the claims cycle time from 31.9 days to 28.1 days, and increased the electronic transmission of data from 85.2% to 90.3%.

The program has produced about $8 million in administrative savings for hospitals so far according to Kenny Deng, senior director, provider relations and operations for Blue Shield. Savings are related to the lower labor costs per completed claim, faster claims payments to the hospitals, and a reduction in the number of resubmitted claims.

On a per-episode basis the labor costs associated with a claim returned for additional information is $30; for a technical denial (eligibility issues, for example) it's $75; and for a clinical denial, including authorization disputes, it's $175.

Deng estimates that if more payers and providers addressed their inefficient claims process that saving could top $80 million in the California market alone and $800 million nationally. On a national level a PricewaterhouseCoopers study notes that $1.2 trillion is wasted in the U.S. health system each year with inefficient claims processing accounting for $210 billion of that waste.

Savings aside, the best part of the process says Deng is the relationship that is developing between Blue Shield and the hospitals. The two meet quarterly to review the claims data stream, identify the root cause of any lingering claims issues, and to work through solutions  without finger pointing. "There's trust there," Deng explains.

George Mack, vice president of payer/provider and member relations for the Hospital Association of Southern California, calls the POET program a "major step forward" in driving out waste in the claims process. He is speaking with other payers about adopting a POET-like system and expects to have another payer adopt the effort sometime this year.

Participating in POET requires the infrastructure to handle electronic data streams. But sometimes the real challenge is getting a hospital to understand the value of the data and properly use the reports. Mack says that's where the HASC collaboration helps.

"We can talk to other hospitals and explain that POET is an opportunity to get faster, accelerated cash by identifying the root causes of claims denials." He explains that POET is a "process deep dive" down at the revenue cycle level and is an opportunity to work directly with the hospital staff in the trenches working and analyzing the claims. The deep dive is "like digging for gold," he says. "The gold is there. We just need to get down into the mine to find it."

While POET can be implemented with existing claims and IT personnel, Deng says the most important component is the support of senior hospital executives. He mentioned one hospital that had 59% of its processed claims denied in 2011. The hospital receives POET information and is in talks to join, but isn't officially part of the program yet.

The case represents the necessity of making sure everyone gets the information they need to be comfortable with the program. The frustration, says Deng, is that some of the hospital's claims problems are likely easily fixed.

For example, in one case, using an incorrect format accounted for 15% of the claims denied. Health plan use different types of formats for different claims, and while it sounds complicated, Deng says it's just an educational process of matching health plans, claims, and formats.

Dan Martinez, director for patient financial services at Mission Hospital Medical Center in Mission Viejo, says that once the system is up and running, it takes about an hour each month to review the claims denial data and identify trends.

Among Mission's cost savers: It reduced its cycle time for claims by 70% by clarifying documentation requirements and shifting from paper claims to electronic submissions.

For its part, Blue Shield and has just announced a collaboration with the Hospital Council of Northern and Central California, which will add about 160 hospitals to the POET system. Blue Shield is also piloting the process with 30 physician groups.

The process is part of an effort to "break down silos," explains Martinez. "A lot of claims problems are because hospitals and payers "just speak different languages."