Pure Genius: TPA and Hospital Collaborate to Decrease Denials and Save

The hospital and third-party payer relationship is an intensely inharmonious union between two entities that have two common goals—to make patients well and to get paid well in the process. For years hospitals would send in reimbursement claims and insurance companies would approve some and reject others for a variety of reasons.

The denials would then become a ping-pong match of requests for additional documentation and explanation. Denied claims could take months, and occasionally years, to fully resolve, leaving both parties dissatisfied, and money-sapped, by the whole process (though some might say the process was originally designed to be intentionally inefficient, that's another story).

After years of this back and forth, it was high time for one of these two players to say "Enough! Let's work toward achieving our common goals together by solving these unnecessary denials." As they say, there's genius in simplicity, and what I'm about to share with you is almost Einstein-esque.

A Light Bulb Moment
Just as thousands of hospitals spent the last couple of years analyzing their costs and looking for innovative ways to reduce them, insurance companies like Blue Shield of California were looking for innovative ways to reduce their costs. They look at their claims process and recognize that it is notoriously difficult, and is plagued by complex contracts and inefficient systems to process claims data. Furthermore, human error often slows the process and leads to frustration and cost overruns. Then, it hits them, "What if we collaborate with a hospital to try to reduce the number of unnecessary claims missteps before they occur?"

It wasn't long after this light bulb over the head moment occurred that Blue Shield of California created their Partnership in Operational Excellence and Transparency program. POET entails Blue Shield of California partnering with nearly 100 hospitals around the state to offer transparency around claims data in an effort to reduce waste in the system.

POET is designed to help hospitals to see the claims process more clearly through a web-based dashboard which displays reports on claims performance, including details on cycle time, submission types, denial percentages, and appeals. The result: the hospital and the health plan can make informed, data-driven decisions and better manage revenue cycles by speeding up reimbursement decisions.

"I initially heard about this program at the conference. I was impressed by Blue Shield of California's willingness to say we have a problem and we can lower costs on both sides. Then they put forth a streamlined denial resolution process and a better information sharing process to deal with these types of claims," says Richard Igram, vice president for contracting at St. Joseph Health System in Orange, CA.

"There seems to be a mistrust of the insurer. Our job is to get what we believe is owed under the contract and historically we've viewed theirs as looking for ways to hold on to the money. But this is counterproductive. Each side knows it needs to have a relationship with the other," explains Igram. "So when they say we are laying ourselves open to you to hopefully improve the claims payment processing cycle; you pay attention."

St. Joseph Health System, which includes 14 facilities and generates $3.69 billion annually in net revenue, began working with the POET program just more than a year ago. Igram connected with Juan Davila, senior vice president for network management for Blue Shield of California, whom he had worked with during numerous contract negotiations over the years.

Blue Shield of California acknowledges that in the past insurers and the hospitals haven't had a symbiotic relationship. "There's a trust level there you need to build and you do that by having a sincere dialog," explains Davila.

St. Joseph's and Blue Shield created a team to work together on claims that encountered problems. The goal was to ferret out issues that occur frequently that can be readily addressed on either side. For instance, the hospital expressed concern over why the insurer's claims examiners would request an entire patient file be sent to them when what was really needed was one page of documentation.

In some instances a patient file could be are hundreds of pages long and having to send them that type of excessive and unnecessary documentation was time consuming on both sides—for the hospital to photocopy and for the insurers when the examiner needed to wade through so much material to find the appropriate piece of information. Now when Blue Shield asks for this type of documentation, the hospital takes a photo of the size of the file and sends it to them with a request for them to narrow down what it is that they need for additional documentation.

Blue Shield of California wasn't the only one who needed to refine its processes; St. Joseph's also recognized that they weren't doing everything they could, too. For instance they weren't submitting their Electronic Data Interchange (EDI) with all the necessary information in all the right places, and that was causing delays on their side. "We both have to work to figure this out. My team has been very receptive to this program and it's helped us identify and improve other areas to improve such as coding," says Igram.

Davila says that by discussing this process with both sides they were able to look at the denial and appeals patterns and see different process patterns emerge, and then work to correct them.

"This is the first time in my 20 years of doing this that we are all problem-solving together and not finger-pointing," he says.

So far, the collaboration is paying off. Davila says that Blue Shield of California has seen St. Joseph Health System claims denials shift from 20.5% in 2008 to 12.2% in 2009, and their EDI cycle improved from 15.8 days in 2008 to 13.9 days in 2009.

Currently, Davila says Blue Shield of California is the only third-party payer to provide this type of collaborative approach to claims processing, however, his team recently presented this program as a best practice at a national insurance conference. Whether it takes off nationwide or not, Blue Shield of California plans to roll the program out to all 350 facilities enrolled in their network with the hope that everyone can begin to realize greater savings in this process.